Tax planning is everything that happens before the year ends to change what you owe. Tax preparation reports the result; planning shapes it. The difference is timing: almost every meaningful strategy (an entity election, a retirement contribution, an equipment purchase, a change in owner salary) has to happen during the year to count.
How a planning engagement works
- 1Projection: we build a projection of this year's income and tax from your books, prior returns, and expected changes.
- 2Strategy: we identify the strategies that apply, estimate the savings of each, and rank them by value and effort.
- 3Implementation: we help put them in place, from filing elections and adjusting payroll to opening accounts and setting up documentation.
- 4Quarterly check-ins: we update the projection as the year unfolds, adjust estimated payments, and catch new opportunities.
- 5Year-end review: a final pass in the fourth quarter, while there is still time to act.
The strategies we use most
Entity and compensation
For profitable owners of pass-through businesses, an S-Corp election and a well-documented reasonable salary are often the largest single saving, because distributions avoid payroll tax. The salary level also interacts with the Qualified Business Income deduction and retirement contribution limits, so it is planned rather than picked. The LLC versus S-Corp guide covers the mechanics.
Retirement plans
A Solo 401(k) or SEP-IRA shelters a significant share of business income, and high earners with stable profit can use cash-balance or defined-benefit plans to contribute far more. Plan choice depends on employees, age, cash flow, and how much flexibility you need year to year.
Timing and investment
Cash-basis businesses can shift income and expenses between years by timing invoices and purchases. Equipment, vehicles, and many improvements can be written off immediately through Section 179 or bonus depreciation: useful in a high-income year, but only if the purchase makes business sense on its own.
State taxes and deductions
Many states offer pass-through entity tax elections that let the business pay state income tax and deduct it federally, working around the cap on individual state and local tax deductions. We also look at accountable plans for reimbursing home-office and vehicle costs, hiring family members for real work, health savings accounts, and charitable timing, plus the ordinary deductions in the commonly missed deductions guide.
We document the business purpose and the authority behind each position. A strategy that saves money only if nobody asks about it is not a strategy we recommend.
Estimated taxes are part of the plan
Owners without withholding pay tax through quarterly estimates. The safe harbor rules let you avoid underpayment penalties by paying 100% of last year's tax (or 110% if your prior-year adjusted gross income exceeded $150,000) even if this year turns out higher. We set your quarterly amounts from the projection and update them at each check-in. The estimated tax payment guide explains the rules and deadlines.
Who benefits most
- Owners whose profit is growing or reached a new level this year.
- Anyone considering an entity change, a large purchase, or bringing on a partner.
- High earners with W-2 and business income in the same household.
- Owners selling a business, property, or significant investment.
- Businesses expanding into new states.
Planning around events, not just the calendar
Some of the most valuable planning happens around events rather than quarters: buying or selling property, taking on a partner, a large contract, a year of unusually high or low income, moving states, or preparing to sell the business. Each one has tax consequences that are cheap to manage beforehand and expensive to fix afterward. Part of the engagement is knowing about these early: we ask at every check-in what is coming next.
What to bring to the first meeting
- Your last two years of personal and business returns.
- Year-to-date financial statements or access to your bookkeeping file.
- Current owner salary, distributions, and retirement contributions.
- Any large purchases, sales, or changes you expect this year.
An illustrative example
Consider an owner whose single-member LLC nets $150,000 a year. As a default LLC, nearly all of that profit is subject to self-employment tax. With an S-Corp election and a documented reasonable salary of, say, $80,000, the remaining $70,000 can be taken as distributions that avoid the roughly 15.3% payroll tax, on the order of $10,000 a year before the added payroll and filing costs, which commonly run a few thousand dollars. A Solo 401(k) can then shelter employee deferrals plus an employer contribution of up to 25% of that W-2 salary, reducing income tax as well.
These figures are illustrative: the right salary depends on the work you do and what comparable roles pay, contribution limits change each year, and state taxes vary. The point is that the strategies compound: entity, salary, and retirement decisions are modeled together, not one at a time.
Planning connects the whole year
Planning only works on accurate numbers, so it pairs naturally with monthly bookkeeping, and it ends with tax preparation that reports what was planned. For businesses that also want forecasting, budgets, and cash planning, CFO advisory extends the same projections into operating decisions. The best time to start is early in the year; the second-best time is before the fourth quarter, while the year-end deadlines still leave room to act.