It’s called tax PLANNING. You need to PLAN it.
Hey, I’m Michael Eckstein 👋, and this is ‘Ordinary & Necessary’, a weekly newsletter about the boring business topics that don’t get enough traction on the web, but will help you manage and grow your business. You signed up on my website. If you’d like to unsubscribe, just click the link at the bottom of this email. No harm, no foul, I’d love to have you back sometime.
Tax season officially ended two days ago on October 15th. I spent the day getting final info, harassing clients for signatures, and filing tax returns. I clocked out at 7pm.
At 3pm, I spoke to a new client about making a retroactive 2019 SEP IRA contribution. He had 4 hours to get the okay from his wife to use their emergency fund, open a SEP IRA account, fund it, confirm it with me, and re-sign the filing authorizations. (Note: Retirement accounts can’t always be opened that quickly.)
That isn’t the first time I’ve had a last-minute tax strategy session and it won’t be the last. There’s a few every year. The problem (other than me pulling out my already receding hair) is that all your good tax planning options disappear on December 31st. Adjusting your salary, planning around tax loopholes, year-end purchases, opening certain retirement accounts, double-checking your quarterly estimated tax payments, and other strategies all need to happen before the year ends. After New Year’s, you’re limited to retroactive contributions, cleaning up your accounting, and whatever weird loopholes your accountant can find on your tax return.
Plan for tax planning. Schedule a tax check-up with your accountant sometime between now and Thanksgiving. Don’t wait until the December slump starts. Once we’re in the holiday season, getting an appointment will be much more difficult. Also, waiting until December may leave you with too little time to put your tax plan into action. Because I could tell you a $25,000+ retirement contribution would save you $10,000 in tax, but you’ll need time to save up funds.
Action Item: Schedule a tax check-up with your accountant. (And, have your year-to-date accounting ready so you can talk about real numbers.)
Have a great weekend and stay safe!