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3 Reasons to Schedule a Year-End Tax Planning Meeting With Your CPA

3 Reasons to Schedule a Year-End Tax Planning Meeting With Your CPA

November 24, 2022

If you want to minimize your annual tax liability, optimize your deductions, and keep as much of your hard-earned money as you can, smart tax planning and good professional advice is essential.

This is true whether your basic information and financial situation hasn’t changed much from the previous year, or if there have been substantial modifications in your status, so new tax planning strategies are needed, ideally the sooner the better.

 Wondering if it's time to check back in with your CPA and figure out where you are and what, if anything, should be changed before 2023 arrives? Here are three signs why you should schedule an end-of-year tax planning meeting.

1. Your family is changing.

If you have added a child to your household this year, you can consider restructuring your long-term savings formulas to reflect a goal of saving for your child's college expenses in addition to your future retirement. There are a variety of tax-related pros and cons of different college savings strategies out there, including retirement plans that allow you to make penalty-free withdrawals if you use funds for a family member’s higher education costs.

While having a baby and raising children can come with some costs, parenthood does provide tax benefits, including additional withholding and credit options. 1

Marriage, divorce, job changes, and moves can also affect your family financial equilibrium, including tax and financial plans. Give your CPA a call if your family has undergone changes in the current year or is expected to see significant changes in the upcoming year. Way to plan ahead!  

2. Your profits have increased substantially.

If your business changes, you should also reach out to your accountant, especially if it includes a significant increase in profits. As your profits grow, you will need to explore new tax planning strategies as well as ways to reduce overall liability. Depending on your situation, your CPA may advise you about possible modifications that can be made to the overall structure of your business. 

Another useful suggestion if your income increases dramatically is to begin to file taxes quarterly, rather than trying to scramble to assemble a big chunk of money in the spring.2

You can also put more tax-deferred contributions into your retirement account, or embrace other strategies to reduce your tax liability when you file your return. Your CPA may have other recommendations.

3. You have excess working capital.

If you carry excess working capital into the new year, you will be taxed on those profits. Even if funds are just sitting in your business or personal bank account, you will still face corporate or personal income tax on those amounts. To avoid this, check in with your CPA before the end of the year for some possible options to optimize these funds in a way that is able to help your business, increase deductions and reduce your tax liability.

For instance, you can invest in new equipment or prepay operating expenses. You can invest in your people and their well-being with salary increases or bonuses. You can even look for ways to expand, such as acquiring a related company or a competitor. Or simply accept the tax liability and be proud that you have a surplus available for future slower times.3

Ultimately, the reason you should check in with your accountant at the end of the year is to identify tax-saving strategies for the current year. If you wait until tax season and the calendar to start over, it's generally too late to do much that’s substantial (with the exception of making a retirement contribution). 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 1-05325540



1 Claiming a Baby as a Dependent, Parents,

2 Pay as You Go, IRS,

3 The Best Problem: 5 things to do with excess cash, INC,