The are two methods of attacking problems. The algorithmic method requires you to follow a step by step mathematic formula to arrive at the correct answer. The heuristic method requires you arrive at the best decision after sorting through a myriad of possibilities.
Obviously the heuristic method is the better approach, but it
the heuristic method in favor of an algorithmic method.
We utilize the heuristic approach, and we have the staff to excel at it.
Seven Step Tax Strategy Process
But even heuristic approach requires process. This is the process we utilize to attack tax problems.
1. Interview
2. Review
3. Tax Preferences
4. Entity Selection
5. Tax Strategy
6. Valid Business Deductions
7. Audit Protection Strategies
Step 1: Interview. First we interview potential clients to determine their life circumstances, their individual life goals and their dreams. This unusual step is essential for us to devise tax strategy that integrates with and enhances the aspirations you have for your life. Without this first step we might design a tax strategy that fits your neighbor better than it fits you.
Step 2: Review. Recent tax returns tell the story of what is being done right, and what is being done wrong and what changes are necessary. Reviewing them tells what steps need to be taken immediately to stop the bleeding. In some situations amended returns are in order. In nearly every situation rearranging your business to save on income tax is in order. Sometimes the need is urgent.
Step 3: Tax preferences. This is the best time there has ever been to be a tax paying small business owner. Over the last two decades the U.S. Congress has littered the tax code with tax saving devices and tax preferences aimed directly at small businesses and professions. But without a comprehensive tax strategy to take advantage you may not qualify. You could miss out entirely on this historic opportunity.
Step 4: Entity selection. There are something like 25 or 30 entities you can select for conducting business. We generally recommend one of five basic entities, each of which is taxed differently from one another. The selection of entity (or entities) is vital to developing effective tax strategy because each entity re-characterizes income as it pours through an entity. It also determines deductibility of certain expenses.
Step 5: Valid business deductions. There is a string of legal cases that runs from the U.S. Constitution through key Court of Appeals cases and Supreme Court cases to the tax code. That string establishes dual tax systems in the United States. The essential difference is the degree of Constitutional protection of deductions. No deductions for wage earners are Constitutionally protected, but ALL business deductions are protected by the U.S. Constitution. Most owners of closely held businesses and their tax professionals are not even aware of that. As a result, most, if not all of them, overlook legitimate business deductions. In the Ellis Practice we go to great lengths to educate clients how to determine valid business deductions.
Step 6: Tax Strategy. The final step in taking full advantage of this process is tying it all together by formulating a comprehensive tax strategy. Sometimes this requires operational changes to qualify.
Step 7: Risk Control. Ancillary to this process is taking steps to protect you from challenge from income tax authorities. Read about it here.
Working your way through these seven tax savings steps will have dramatic impact on your life and your tax liability.
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cm@elliscpafirm.com