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You started your business to create a livable income and it seems that any extra monies you create go to taxes. This is whether you are a pass-through entity where the top tax rate is a whopping 37%, or a C-Corp where you get taxed 21% at the business level and then again at personal and dividend rates. We are talking about your federal obligation and haven’t included what monies you are going to owe for state and local taxes. It is safe to say that your taxes are quickly becoming your biggest expense. It is time to start rethinking what Wealth Management means.

Most of us do our planning for wealth management with extra monies we have accumulated after all of these federal, state and local taxes. What we need to start doing is doing our wealth management with business monies. The idea is to take our pre-tax dollars (the ones you haven’t given to the IRS yet) instead of your after-tax dollars (the smaller amount because you have given them away to the IRS). That means you are giving away your money to the IRS every time you spend after-tax dollars when they could have used pre-tax dollars. So, lets talk about some ways we can start spending those valuable pre-tax dollars.

First, make sure you are working with the right Certified Public Accountant. The General Accounting Office was created by our government and they estimate we over pay our taxes each year by a billion dollars. These are due to the mistakes being made on your tax returns. You want to find a CPA who is staying up to date with training and has a vast knowledge of the tax code. The time to sit down with your accountant isn’t when you take in your information at the end of the year but instead someone you have several interactions with throughout the year.

Your plan should be how much you are going to pay in taxes, not some number you feel you have no control over. This is why you want to create a full tax strategy that stays within the law and it best utilizes those pre-tax dollars. Another benefit of doing tax planning and being proactive is you are going to be lowering your risk of being audited. When you are using a tax plan you are paying attention to your tax issues and constantly reviewing, which translates into detailed documentation.

Tax plans can become very creative. It is always a good idea to explore income shifting to later tax years or to lower income brackets. If you haven’t thought about employing your children, this is something you should consider. Have your business establish separate entities for your assets if they are purchasing things like capital equipment and real estate. Review your business entity formation to see if you could be saving more money if you changed to something else. Most importantly you want to make sure you are exploring all your options with your CPA.

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