How To Create A Tax Strategy
Step 1: VISUALIZE YOUR RESULTS
This is a process that requires you to dream. Where are you today, and where do you want to be in the future? What does financial freedom look like for you? Most of our clients find that when they ask themselves these questions, they are able to create a path they thought was out of reach.
This goal-setting process will create your wealth vision. Why is that important? The goals you have for your wealth — your business and investments — shape your future facts. These facts heavily influence your tax strategy and also provide the basis for your wealth strategy.
A successful tax strategy is designed around a holistic look at the goals you have for your business, your investments AND your family. Never settle for a tax strategy that doesn’t accomplish your goals in all of these areas.
Step 2: ENTITY MAP
Next, it is time to dive into a detailed review of your existing ownership structure to determine what needs to change from a tax and asset protection standpoint. Remember: If you want to change your tax, you must change your facts.
Your strategy begins with identifying the current facts about how your business and income is structured. By understanding the facts about how your business fits into the regulatory bodies of federal, state, and local entities AND how tax laws affect your bottom line and wealth, you will be able to develop goals that are identifiable and obtainable.
Did You Know That 50% of Your Tax Incentives Depend On How You Tax Your Entity?
That’s why your tax strategy MUST include an in-depth evaluation of how your business and personal tax situation is structured. After you have assessed your current entity structure, you will identify the type of entity (or entities) that you should use now and in the future, including how each should be taxed. You also will determine the state(s) in which to organize and/or register each entity for income tax purposes.
You’ll complete this step with a comprehensive entity map that will guide the rest of your strategy. This will determine where your money goes and when and how you will be able to utilize it down the road.
Step 3: DEDUCTIONS
With an optimal entity map in place, it is time to get strategic about your tax deduction strategy. In this step, you will identify deductions you are not claiming but could be claiming.
Deductions often have a bad reputation, with many people feeling afraid to take certain deductions out of a fear that they will be a red flag on their tax return that triggers a costly and painful audit. The truth is that deductions exist to incentivize certain behaviors. They are there SO THAT YOU CAN TAKE THEM. You just need to be sure to take them properly.
It is crucial to understand how to use your existing and new entities to maximize and protect your tax benefits in your day-to-day operations. You'll pinpoint how to claim and document business and investment expenses properly.
You may find that you have expenses that you are paying for personally that, properly structured and documented, could be paid from your business or investment activities. When you do, you’ve found permanent opportunities to lower your tax payments.