Avoiding “Taxpayer Remorse”

January and February are traditionally the months when we get our taxes organized and then send the information to our tax preparers. Or, perhaps it’s March and April for some. Either way, once we hear back from our tax preparers, many taxpayers experience what I call “taxpayer remorse.”  This is when one realizes that, with planning, some taxes could have been avoided. A deferral here, a deduction there – and the tax bill could have been lower. 

Particularly with business owners, tax remorse can be attributed, at least in part, to delay in taking action. For example, I had more than one business owner hold off on a needed equipment purchase because they wanted to see if Congress would extend (into 2014) the high levels of expensing under Section 179. Congress didn’t act, nor did the business owner. The amount that can be expensed has now dropped from $500,000 to $25,000. That’s a lot to be remorseful about.

A good way for a business owner to avoid taxpayer remorse is to tie in tax planning for the future with tax reporting from the past year. In other words, as an owner works with his or her tax team to compile information for filing 2013 taxes, it is also a good time to work with the team on specific tax plans for 2014 and beyond. When one is looking at taxes owed, there is an increased incentive to consider tax savings for the future. Plus, a long view of tax planning can provide some of the best tax savings.  Consider the example of a nonqualified deferred compensation plan. Only future wages can be deferred, so it’s already too late to use this as a tax saving vehicle in 2014. An employer needs to create a plan this year to help an executive save taxes in future years. If planning is put off until December, it is doubtful the documents and elections can be put together in time.

My latest article in Forbes offers a good starting point for avoiding taxpayer remorse.  It provides a quick look at the 2014 playing field for taxes — both the positive and the negative, along with some planning ideas to pursue. It’s a good way to help you get your season started out right and develop a tax-smart game plan for the rest of the year.

Steve Parrish is a regular contributor on Forbes.com, discussing issues and trends that impact business owners.

 

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