3 Steps Guaranteed to Slash Your 2013 Taxes
(and Why Your Tax Preparer Is Probably Not Helping You Cut Your Taxes)
By Wayne J. Belisle, CPA
I’ve had my own business since 1991, and I passed the CPA exam way back in the late 70s. I’ve been helping taxpayers, small business owners, professionals, and real estate investors save thousands of dollars in taxes for a long time. But I have never seen anything like 2013’s tax season, or the tax increases that are coming our way in 2014, or the changes in the regulations and the audits. I decided that we really needed to be more proactive, and my clients needed to be more proactive, so we put together a series of free webinars to give you lots of ideas on how to slash your taxes for 2013. More importantly, they will give you the ability to plan and keep your taxes down every year going forward.
Why your tax preparer is not helping you cut your taxes
I bet every time you signed your tax return, you had this question lingering in your mind. Am I really paying the least amount of taxes possible? And the answer is probably no. Every year, a business magazine hands a pretty complicated tax return to 10 high-powered tax preparers who comes up with 10 different answers. That’s because it’s not black and white; there’s a lot of gray. Just think, that’s based on getting the same information. As tax preparers, we’re usually not getting told everything. One reason we’re not getting all the information is because our clients don’t know everything they can do, so they can’t tell us.
Most taxpayers strongly believe that all they have to do is hire an experienced tax preparer and that’s it; they’re guaranteed to pay the least amount of taxes possible. Unfortunately, this is far from the truth. Nobody is going to think about your tax bill the way you’re going to think about it. So if you want to lower your taxes, you have to work on taking advantage of all the legal tax deductions. You have to educate yourself a little bit. You have to look at income tax as a business expense, and learn to manage it as you would any other expense in your business or in your personal life.
Let’s talk about the difference between tax avoidance and tax evasion. The old accounting joke: The answer to that question is 20 years. Okay, it’s a bad joke. Tax avoidance is totally legal; the Supreme Court has ruled that no taxpayer has an obligation to pay the maximum taxes possible. In fact, they almost had a moral obligation to pay only what they were required to pay. That means you should structure your business dealings in a way that minimizes tax. It could mean paying all of your medical bills in the same year rather than spreading them out over five years so that more of it is deductible. It could be claiming an S Corporation to minimize Social Security and Medicare taxes. Whatever you decide to do, there’s nothing wrong with it, because you’re only doing things the tax code allows. You are only taking legal deductions and legal ways of structuring your business.
Tax evasion, on the other hand, is when you consciously go out of your way to circumvent the tax code. This is most commonly not reporting all income, pocketing cash income, taking deductions that you’re not entitled to, things like that.
Three steps to slash your 2013 taxes
First, make an appointment before July with your usual tax preparer, or one who does year-end tax planning. Not all tax preparers are created equal; one of the first questions I’d ask is, “How busy are you in November and December?” I am really swamped in November and December because I’m doing tax planning for almost all of my large business clients. So if your tax preparer isn’t that busy in November and December, they’re not taking tax planning seriously. You probably need to go find somebody else.
Second, bookmark some tax blogs. Read them once a month so you can stay current with any law changes. Learn tax-cutting tips that may apply to you. We’re going to put a list of my favorite tax blogs up on our membership site.
Third, set some time aside monthly to review your tax situation and explore ways to cut your taxes. I’m not talking about a whole day; I’m not even talking about several hours. Thirty minutes each month will probably be enough. Call your tax preparer when you come up with any ideas that may cut your taxes.