By Ajay Singh, Esq, CPA
Most people assume that they should meet with their CPA to discuss their taxes after December 31st. The typical logic behind people’s thinking is there is no sense in meeting with their CPA before year-end since they don’t receive their various tax forms such as 1099’s or W-2’s until January or February of the following year.
On top of that, there is the psychological factor related to meeting with your CPA; most people (and who can blame them) dislike taxes and treat a visit to their CPA’s office similar to a visit to their dentist’s office. If there is a way to delay they will make sure to procrastinate as much as possible!
The major problem with waiting until after December 31st to meet with your CPA is it is too late to make any moves related to your business which could help lower your taxes because the year is already over. Any moves you make at that point will only affect the next year’s taxes and not the prior year’s taxes. That’s why the best time to meet with your CPA is in October or November.
I am sure I still don’t have you convinced so let me dig a little deeper here and expand on my reasons why you shouldn’t wait.
A good CPA doesn’t only prepare taxes but also helps his or her clients reduce the taxes they will have to pay by effectively utilizing tax reduction strategies. The most effective tax strategy to use for a particular client may differ from year to year and will often be based on what has already happened during their client’s tax year. If you meet with your CPA in October or November he or she can look at what has happened so far during the year and estimate what your taxes will be for that year; this will allow your CPA to advise you on effective tax reduction strategies that you can implement before December 31st. If you wait until after December 31st it will be too late to implement any of these tax planning strategies since you are already into your next tax year by that point. Here’s an example to further illustrate this point:
John owns a lawn care business which has been having a record year in 2018 and he expects to make a significant profit in 2018. In addition, John knows he needs new lawn care equipment but has yet to purchase this equipment due to how busy he has been during 2018. John waits till February 1, 2019, to go see his CPA and during their conversation, John mentions his need for buying new lawn care equipment since business is booming. John’s CPA tells him that if he had purchased this equipment in 2018 it would have helped to lower his taxes since it would have reduced the taxable profit related to John’s business. Unfortunately for John, he waited too long to do anything to reduce the hefty tax bill for 2018.
Here’s another reason to not wait…….Your CPA is very busy with preparing taxes once January 1 hits. Your CPA will most likely not have any time to meet with you and often will tell you to just send him or her your various tax documents so that they can prepare your return by the related tax deadline. While he or she would probably like to sit with you and discuss your taxes, your CPA simply can’t due to it being tax season. Most CPAs are not very busy in October/November and will have plenty of time to sit down with you and take a look at what has already happened as well as help you figure out what you can still do to lower your taxes before the year is over. Remember, don’t wait or you will be too late!
*Please note this blog assumes you are a calendar year taxpayer with a tax year-end of December 31st.
If you have any questions on tax planning or laws, get in touch with our team.
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