Is Hiring A Tax Strategist For You?
Oct 10, 2024In this episode, Shannon dives deep into the topic of tax strategy. If you've ever wondered whether hiring a tax strategist is the right move for you, this episode will help answer that question.
One of the central themes Shannon focused on was the difference between a tax strategist and a tax preparer. Essentially, a tax preparer is someone who compiles and submits your tax returns—a crucial task but rather reactive. A tax strategist, on the other hand, proactively helps you plan throughout the year to minimize your tax liabilities effectively. According to Shannon, while having a tax strategist is beneficial for most businesses, it's crucial to understand what problems you expect them to solve.
Shannon emphasized that before jumping on the "I need a tax strategist" bandwagon, entrepreneurs should reflect on their specific needs. Are you trying to address an unexpected tax liability? Are you seeking better communication and planning from your tax professional? "A lot of people are self-diagnosing that they need a tax strategist. Instead, they should be focusing on the problem they are looking to solve," Shannon said.
A massive emphasis was put on the importance of proactive communication between a tax professional and their clients. "A lot of the issues entrepreneurs face could be solved simply through better communication," Shannon pointed out. If your current tax preparer isn't keeping you informed throughout the year about potential liabilities and strategies you can implement, then it may be time to look for a tax professional who does.
What most entrepreneurs dread is the surprise tax bill that comes out of nowhere, often at the worst possible times. Shannon has changed her approach to tax planning to eliminate these surprises. Her firm conducts mid-year reviews—essentially preparing a tax return for the first half of the year to give clients a ballpark of what they can expect to owe. This practice not only prevents nasty surprises but also lets business owners integrate tax savings into their monthly financial planning.
Shannon's goal is to empower entrepreneurs to understand their tax obligations well in advance, giving them the freedom to focus on growing their businesses without the looming cloud of tax stress. "I want you to out earn the stress of taxes," Shannon shared, adding that planning for tax liabilities should never stifle business growth or personal happiness.
There are numerous tax strategies out there—hiring your kids, the Augusta Rule, accountable plans, becoming a real estate professional, and more. While these strategies can be beneficial, they are not one-size-fits-all solutions. Shannon encouraged listeners to focus on big-picture planning rather than chase small, intricate strategies that might only offer marginal savings. The key takeaway? Focus on earning more rather than just on saving.
Shannon also touched on a critical point: never make life-altering decisions just for the sake of reducing taxes. For example, choosing not to live in California despite your love for the state merely because of high taxes should be carefully considered. The essence is to balance your personal happiness and tax obligations—aiming for a harmonious blend that doesn't compromise either.
So what should you focus on? First, identify your needs and understand what tax-related problems you're looking to solve. Communicate these with your tax professional. Ensure your tax professional offers ongoing advice and updates throughout the year, not just during tax season. Implement regular check-ins and mid-year reviews to anticipate tax obligations well in advance. Adopt meaningful tax strategies that align with your business and lifestyle goals without unnecessary complexities. Most importantly, concentrate your efforts on growing your wealth, not just on minimizing tax liabilities.
Shannon concludes by encouraging entrepreneurs to shift their mindset away from frantic tax-saving strategies to a more holistic approach that includes proactive planning, open communication, and a focus on earning more. With these principles, you can build a thriving business without the constant worry of unexpected taxes tripping you up.
What you'll hear in this episode:
06:38 Don't sacrifice happiness for taxes; prioritize values instead.
10:02 Plan based on tax behavior updates, stress-free.
11:02 Focus on saving discipline and mindset shift.
If you like this episode, check out:
Why You Want to Avoid Tax Extensions
Think Twice Before Forming a Multi-Owner Business
Moving to a Tax-Free State - Worth it?
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
