You’re in the business world now and taxes can feel like a big, scary, dark cloud looming over you. You’re hearing all sorts of new terms, being told all sorts of tax advice, trying to navigate your way through forms, and deadlines, and strategies that are completely foreign to you. Needless to say, it can feel like a lot.

The smart solution is to turn to an accountant for help. Surely they know how to navigate this crazy world of taxes, right?

But then they ask what services you’re interested in and apparently “tax services” isn’t clear enough? Ummm… where do you go from there? We’ll tell you.

There are really two different types of tax services: tax preparation and tax planning (aka tax strategy).

Think of it like a tornado watch vs a tornado warning. During a tornado watch, you plan for the possible impacts of a tornado. You gather supplies, weatherproof your house, and make a plan for evacuating if necessary. This is tax planning. During a tornado warning, the storm is already here. There’s no time left to plan, you just have to deal with the situation as best as you can in the moment. This is tax preparation.

Tax planning is all about forward thinking. It happens throughout the year, well ahead of the tax deadline. It’s all about being proactive with your taxes, making the most of deductions and write offs, and being strategic so that you can save money on taxes and not pay more than necessary.

Tax preparation happens during tax season. It is an after the fact kind of thing. What has happened, happened. We can’t go back and change the facts, we can only record them. At this point, we compile data, fill out the correct forms, pay the taxes due, and that’s that. There’s no room for creativity, it’s just facts and forms.

The good news is, taxes are not as scary as tornadoes (we promise!), but in both situations, planning ahead can make a world of difference.

What happens during tax planning?

We can’t speak for everyone but we can tell you what we do. In our monthly tax planning package, you’ll meet regularly with a tax account manager. They’ll take a look at your books and help you decide what is best for you and your business. They’ll help you calculate your estimated tax payments, coach you on best tax practices, help you maximize deductions, prepare and file your business/personal tax returns, and answer any of your questions. There will be no surprises come tax season because you’ve already planned ahead and worked with our team to create a personal tax strategy. 

What happens during tax preparation?

During tax preparation, you gather all of your tax information, upload it to your client portal, and then a qualified tax preparer will prepare your tax return. Your tax preparer may be able to give you a few tips or suggestions for saving money on your current tax return, but most of those tips will be based on actions taken in the previous year. At tax time, your preparer can really just make sure you’ve included all the necessary information and report it properly. You can’t go back and make changes to your financial decisions from the previous year.

What should I do next?

That depends on you, your business, and your goals.

Typically, we recommend our tax planning services to businesses that are currently bringing in $70,000+ in annual net income. If that sounds like you, check out our tax planning packages. It could actually save you tens of thousands of dollars! No but really. We have the receipts to prove it.

If your business isn’t quite there yet, there are still a few things you can do to plan for the next tax season:

Make estimated tax payments.

 These are tax payments made in advance to the IRS and your state tax authority so that you owe less when it comes time to actually file your taxes. We usually suggest making a payment of about 15% of your net income to the IRS and 5% of net income to your state. We go into a lot more details about it here. 

Track and gather personal expenses.

Did you know that you can take a business deduction for certain expenses that you paid for personally? Phone, internet, mileage, and home office expenses can all be deducted on your tax return. Gather those receipts or check your bank statements and have those annual amounts ready for when it’s time to prepare your tax return. We also have a handy dandy tracking sheet included here.

Find a tax preparer

Want to know one of the biggest tax savings strategies? Hire a professional! We literally get paid to help you save as much as possible on taxes. So, take advantage of our expertise! Patton &.Co. offers a variety of tax preparation services. You can learn more here.