Monitoring your progress along the financial planning journey

Robert Valente, CEO and Managing Member, RAV Financial Services

In previous articles and webinars I explored various issues as to how philanthropy may be an appropriate consideration for your business and financial plan. I also addressed the ever-challenging concept of business succession and continuity planning; however, business owners’ priorities are diverse.

According to a CCH Client Perception Survey (as reported at the OSCPA Professional Issues Update) minimizing taxes is the top business concern, followed by tax compliance, better business management and payroll compliance. Succession planning ranked below most tax and audit issues. However, the top individual concerns of  clients (some of whom are business owners ) are minimizing taxes, preserving accumulated wealth, saving for retirement, avoiding an audit, managing a budget, creating a financial plan, working toward financial goals, estate planning, managing eldercare finances and bankruptcy issues.

So let’s discuss the more taxing issue on people’s minds. Here we are eight months into 2011, and what have you been doing to be fiscally conscientious?  Some of you may have filed an extension for your 2010 income tax return and are still agonizing over the data to collect to complete last year’s history. But are you going to project and strategically plan for the remainder of 2011?

Let’s begin with some basic items to get better prepared for the April 15th, 2012, deadline:

Quarterly tax payments Have you met with your financial/tax advisor to project income and deductions for this calendar year? How have you decided to make the additional income tax payments? April and June due dates are behind you, and the September deadline is not too far way if you have chosen the quarterly estimate route. Maybe you chose to increase your withholding from your paycheck throughout the year.  In either event, have you met with your advisor to determine how accurate you are thus far in this year’s tax projections? What adjustments should you make? Are there any gains/losses in your investment portfolio that you may need to take now to either lock in a gain or take the loss now and further adjust your withholding or quarterly tax payments?

The alternative minimum tax (AMT) has always perplexed the unsuspecting taxpayer. So if AMT affected you last year, how are you planning to deal with the issue this year? Things you believe to be a personal deduction on your tax return may not be a deduction. Work with your financial and tax advisor, in advance, to strategize specifically for your situation.

Record-keeping — My experience is that most people stuff tax information into an envelope during the year, never looking at it to determine its importance or relevance. A good suggestion would be to spend some time each quarter reviewing the data gathered, for both your business and personal life, with your advisor. Many of us spend so much time throughout the year gathering data about what was done in the past. What you need to do is allow time to plan during the year to create strategies and collaborate with your advisor to minimize your current and future income tax burdens.

Retirement plan contributions — This is the time to determine if you are maximizing your retirement plan contributions. If you don’t have a pre-tax contribution retirement plan, this may be the time to have a discussion with your employer/tax advisor about the appropriateness of such a plan.

Additional tax reduction ideas — In your day-to-day work schedule, you are focused on generating income. Allow your financial advisor to work with you to suggest business and personal strategies and techniques that you can utilize in your daily life to help you create wealth. For example, what fringe benefits can you institute that would provide you and your key employees non-taxable benefits, while qualifying as a deduction to your business?

In your journey toward significance, tax data, cash flow issues, business continuity planning and philanthropy are all a part of financial success. Feeling significant is a direct result of how you integrate these into your attitude and behavior as you manifest your life’s purpose through your business and life plan. Your wealth management coach and planner can be an invaluable partner in your ability to keep sight of the bigger picture. Are money and your business an end in itself, or are money and your business the means to your personal end? Once you clearly define the end (your purpose), the answer will become more obvious.

I look forward to your comments and questions.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at [email protected]