What could be sweeter than tax savings for your Valentine?

by Michael McCormick, CPA

I find myself writing an article for the Valentine’s Day edition of Shawnee Life as Christmas Day concludes. Searching for inspiring words that make a difference. The house is quiet. Not a creature is stirring. Hopefully not even a mouse. Our collective attention now turned to the coming new year and the visions of all its possibilities. Most of us don’t realize that now is the time for the romantic notion of tax planning. Right now, in February.

We have the majority of the year in front of us to make changes that will help us earn more, pay less, and invest more for our futures. It’s the sort of planning that’s better than what the mainstream media tells us about in December when we only have days to make changes.

Ask for that raise now, increase your marketing efforts, close more deals. If we’re in a recession you don’t need to let it be your recession. Keep at it. Find the customers, close the deals. Not confident, get coached up. Find a coach whose purpose is to get you your results. They aren’t there to be your friend and will cause you to do things you don’t want to do to get the results you want.

For the most part, 2022 is now history. Other than a possible retirement plan contribution, there’s little you can do to impact your 2022 income tax. Now is the time to affect the numbers and the boxes that go on your 2023 tax returns. If you’re an employee, are you setup to maximize your retirement plan deferral from your paycheck (potentially as high as $22,500 under 50, $30,000 if over 50)? Are you utilizing the ROTH option that may exist in your employer plan? If you are eligible, are you fully funding an HSA savings account ($3,850 single, $7,750 family, over 55 add $1,000 to each)? Are you funding an IRA and if possible one for your spouse? It would be quite the romantic Valentine’s Day gesture. How about converting money to a ROTH account? It could be more long lasting than a dozen roses.

If you own your own business there are even more planning opportunities. Is your business operating within the most effective structure to provide you with the greatest benefit? Does the company have an employer retirement benefit plan? Is your business family friendly? Have you hired your children? They can earn up to $13,850 this year working for your business or someone else’s business tax free. Your child could fund a ROTH IRA and never pay tax on the money. How about hiring your brother-in-law you’re supporting anyway? Imagine the credit you earn with your spouse by taking care of their sibling. And, deducting it as a business expense. We’ve only scratched the surface of what planning makes possible. It really is the key to your financial offense. It’s the first step to putting you in position to have an intended outcome rather than simply taking what may come. Once the opportunities are identified you are in the position of knowing how much can be saved by implementing each strategy and when you want to implement each strategy. I know it’s a different way of thinking about running your life and the realization that you can impact the amount of tax you pay, to your benefit, might be a new experience, but we do it for people like you all the time. If not us, find someone who specializes in integrating the cash flow and tax reducing impact of pro-active tax planning and the empirically proven academic evidence of investing.