It’s never too early to start planning for the next tax year

Tax reform is on the agenda in Washington, D.C., but it’s difficult to know what form it will take or what impact it will have on both U.S. businesses and taxpayers, says Drew Shealy, Vice President and Director of Trust & Portfolio Management at Home Savings Bank.

“You can only proceed on what you know for sure,” Shealy says. “Communication is key, so make sure the people representing each facet of your financial plan are collaborating and looking out for your best interests. From a small business standpoint, the biggest takeaway thus far is that the federal government is looking to ease regulatory burdens on small business owners.”

President Donald Trump has already inked an executive order to repeal two regulations for every new regulation added to the books.

The intent is to spark job and wage growth and free up capital for companies to expand through acquisition and infrastructure spending. As you assess your own personal financial outlook, it’s important to consult regularly with your financial planner, your legal counsel and your accountant or CPA to make sure you’re all on the same page.

Smart Business spoke with Shealy about best practices to prepare yourself for the next tax year.

Where is a good place to begin your tax planning?
You can start by making sure that your quarterly estimates are on pace with your income levels to avoid overpayment, thus making an interest free loan to the government; or underpayment, wherein you expose yourself to penalties and interest.

A lot of folks get into a situation where they miss something and it paralyzes them. They get so worried about what’s happened that they end up doing nothing about it. Some even believe the situation will resolve itself by the end of the year.

But the best thing you can do is to talk to an adviser or a professional to get the problem rectified. It may cost a little to reach a solution, but it’s a far better way to go than to ignore the problem and hope it goes away.

What role can an adviser play in your tax planning strategy?
If you don’t make time for regular conversations with each member of your financial team, you’re missing out on valuable advice and perspective. Each person brings a different set of knowledge and expertise to the table.

You may think that your question is not worth bringing up, but it never hurts to ask. The sooner you let your adviser know about what’s happening, the better off you’re going to be. Financial professionals can offer you advice and help you plan for a change in your investment portfolio or your tax strategy.

If you find that time gets away from you and you forget to make these appointments, use your quarterly estimates as a tool to hold yourself accountable to these check-ins.

What if you have recently made changes on your financial team?
If you have changed banks or have a new investment adviser helping you, it is important to let them know if you have loss carryforwards. Loss carryforwards can often be applied in the current tax year to offset gains on appreciated assets that are no longer performing.

If your advisory team is aware of your history and informed about your tax loss carryforwards, it will allow for more flexibility in the management of your assets, including rebalancing, to reflect your investment objective.

What are some tools that can help you with your tax strategy?
Financial planning software or online aggregators can assist in the organization of your entire financial life in one spot.

They often provide details as to what your overall portfolio allocation looks like and help your advisers plan for your future financial needs, as well as store documents for important matters such as estate planning.

It’s also important to look at appreciated securities versus cash. Find opportunities to shift appreciated assets from yourself to whomever it is you’d like to support, whether it’s your church or another local philanthropic organization.

Donating these highly appreciated securities may help mitigate the tax burdens you might have if you were to liquidate those assets and use the proceeds for yourself.

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