Tax Planning vs Preparation – What You Need To Know Before The End Of The Year | Ep. 265

Intro/Outro: You know what it is. That’s right. It’s time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the money talk with Tiff podcast.

Tiffany Grant: Hey everyone. I am excited because I have Nicole Durio on the line. Now Nicole is here to talk to us about something that’s super important, but often overlooked, especially for us business owners, and that is tax planning and the difference between tax planning and tax preparation.

So hey, Nicole, how are you? Hi,

Nicole Durio: Tiffany. I’m great. Thank you for having

Tiffany Grant: me. Yes, my pleasure. So let’s just hop right in. I think first of all, just to set a baseline for the audience, what is tax planning and what is tax preparation? Then what is the difference?

Nicole Durio: Sure. So tax planning is basically… Planning for the tax year, the tax season, what the tax attributes will look like, whether it will be a tax refund or a tax obligation.

The tax preparation is actually the gathering of the documents and the information to prepare your tax return. And the planning should always occur before the preparation.

Tiffany Grant: Interesting. So let’s just dive a little deeper. So with tax planning, what are some things that business owners should be looking into or, you know, throughout the year?

Because I assume that this is a throughout the year thing, right?

Nicole Durio: Not necessarily, Tiffany, but what I will tell you, I always, um, tell people, I, If you’re looking for a good CPA, I cannot help you, but if you’re looking for a great one, reach out to me. So any great CPA or tax preparer is going to meet with the client three to six months prior to the end of the tax year for which they’re planning.

So, for example, December 31, 2023 will end the 2023 tax year. So, for my clients between September and October, I’ll be conducting meetings to look at how their business operations have been. What their profits look like or their losses, so we can assess whether they need to invest more money in the business, whether they need to put something away for retirement so that there are no surprises when April, 2024 rolls around.

If you are a business owner or a taxpayer and you get your tax bill. And April, October, whenever it is, and you’re surprised, someone dropped the ball.

Tiffany Grant: Interesting. So, as a business owner, and if we have business owners listening in, they should get with a CPA or a tax planner around September or October every year?

Nicole Durio: Yes, three to four, maybe even six months before the end of their tax year, right? Because some business owners have a tax year end that’s different than December 31. So I want to make sure it’s whenever the tax year ends for that business owner. I

Tiffany Grant: see. So what are some things or some strategies that, um, CPAs or people that help you plan your taxes kind of tell you during that time?

Um, just overall general advice. So

Nicole Durio: generally, Tiffany, what I’m doing with my clients is I’m looking at their profit and loss statements. I’m looking at their balance sheets to identify opportunities for tax savings or tax strategies that can be implemented. For example, if they have a lot of cash on their books and they may be waiting to do a build out for, say, a franchise like a Massage Heights or Massage Envy or maybe their Trying to decide if they should buy a new massage table or whether or not they should be leasing or purchasing a vehicle.

We analyze all of those different aspects to determine what is going to make the most sense for them. And every answer is different. It depends upon the client, whether they’re married, whether they’re single, whether they are, have prepaid their taxes, whether they’re waiting until the end. So it’s a pretty complex process.

And there’s a document request list that I sent out to the client so that all of that information is ready and available prior to the meeting.

Tiffany Grant: Gotcha. So what are some things if we have business owners listening that they need to make sure that they do throughout the year to make your job easier?

Absolutely.

Nicole Durio: So keeping good records and being consistent is always a great idea. No tax prepare. Our CPA wants to see their client walk in with a box of receipts. That is so unprofessional and so inconsiderate. There should be some type of documentation or accounting or record keeping. QuickBooks, QuickBooks Online, very simple, easy ways to maintain good records, good documentation.

The other thing, Tiffany, that people don’t think about is when you keep receipts. Over time your receipts fade, so they’re not really good or accurate records because they can’t be used because they become uh, not legible. They’re, they’re not legible over time. So even if you have receipts, you should be scanning those in if you don’t want to keep formal books on a monthly basis.

Oh my

Tiffany Grant: gosh. I completely agree. Um, and just so you all know, QuickBooks has a feature where you can just take a picture of your receipt and then it stores it on there. So if someone like Nicole comes in and she’s like, Oh, I want to see, you know, the receipts to back up this information. All she has to do is log in and everything is there.

Um, so it really does make life. So much easier, not just for your CPA or tax preparer, um, but also for yourself. So I highly recommend as well that you check out QuickBooks and I’ll have a link in the show notes for that. So other than making sure that we have our books in order, are there any other things that we need to be aware of when it comes to, um, you know, get stepping into the tax planning phase?

Sure,

Nicole Durio: make sure that you know or understand or can reach out to your tax preparer about any credits that are available. Like right now, business owners can get the ERC, which is the Employee Retention Credit. There is also a credit for electric vehicles. There’s a credit for getting renewable energy or energy efficient appliances.

There’s a credit for solar panels. So, there are hundreds of credits that are in the tax code. Make sure you’re familiar with the credits that are applicable to you for your tax attributes and your business.

Tiffany Grant: Interesting. So how would we find that information? Like if people are like DIYers, um, how would they find information on what type of credits are available?

They can just

Nicole Durio: Google it, you know, new tax credits available for 2023 or 2022, or, you know, you renewable energy credits. Uh, electric vehicle credits. Just different things like that based on ideas they may have or things they’re thinking about doing. You make, you want to make sure you know and understand what those credits are so that you don’t miss a tax opportunity.

Hmm.

Tiffany Grant: Interesting. Yeah. Cause that’s something that I probably can do better with, you know, just honestly speaking. Um, you know, just knowing. What all is available. So that way throughout the year, I can say, you know, just think just for instance, the electrical vehicle, I can be like, Oh, okay. I know that this is available.

Let me see how I can work it in to, to my, uh, business budget. So that is really good information. Uh, as far as. Tax preparation, because we talked a lot about planning and kind of hit on preparation, but when should we start having those conversations? I know you said, make sure you know what the credits are, maybe talk to your tax preparer before the tax planning, but around what time should a business be thinking about that?

Nicole Durio: Well, a business, a savvy business owner should. Always have taxes somewhere on the mind. It may not be at the forefront, but it should definitely be in the backdrop. The other thing is business owners should know and understand their tax compliance deadlines. For example, many people don’t know if you have an S corp or partnership, your taxes are actually due in March and then personal taxes and corporate taxes are due in.

And then in some states like Texas, where I am, you have franchise taxes that are due in May and also not for profit taxes. So first understanding when your taxes are due and then making sure you give your tax preparer or your CPA an adequate amount of time to prepare them. Because many people like to take advantage of their professionals and they may send the information three or four days before, and then they want a miracle.

Um, yeah,

Tiffany Grant: y’all, please don’t do that. Don’t send your information over right at the tax deadline, um, because it’s not going to go well for anyone. You don’t want, you know, your tax preparer rushing to get through your taxes because you want to make sure they’re done right. And then also you don’t want to put that type of stress on not just them, but yourself as well.

Cause if you’re missing anything, then they have to come back to you, tell you what you missing, you have to find it, all that stuff. So it’s best to just get it over and done with. I know taxes is a little triggering for some people, but if you just get it over and done with and think about it throughout the year, like Nicole said, then.

You know, when text time comes around, it’s not really that painful, at least in my experience. Absolutely. So Nicole, tell us a little bit more about the type of services that CPAs offer. Because I feel like a lot of people have a misconception, and actually I just saw this conversation on Twitter. Um, where people are thinking CPAs are just tax preparers or don’t do taxes or are just accountants and don’t think about that, you know, there’s a lot of misconceptions out there.

So what do CPAs do? Like, what are some services that they could potentially offer?

Nicole Durio: So, Tiffany, I’ll tell you, it really depends on the professional. So, I’m an advisor and a business consultant, but CPA is just my credential. And so, I offer value added services. I help my clients with business plans. I help them determine if they want to identify new franchise concepts, what would be the best fit for them.

I’ve also helped companies buy and sell other companies. So when it comes to me and what I do, I do anything pretty much concerning a dollar. How to save it, invest it, spend it. Depreciate it, save it, hide it, anything, um, really. And when I speak of hiding, I just mean more like deferring, right? Deferring your, your tax dollars or your tax attributes or your tax obligations.

There are so many things that are out there that people just don’t know. I always want to make sure that my clients are educated taxpayers.

Tiffany Grant: Gotcha. Gotcha. Now there may be people listening like, Ooh, that sounds like a lot and a lot of expertise. This is probably expensive. Um, what can we do?

Nicole Durio: It is an

Tiffany Grant: investment.

Yes. An investment to make sure that you’re using your business dollars correctly and doing it the right way. Um, which I highly recommend y’all, um, making sure that you have, you

corner. So that way, if anything comes up, you can bounce this information off. You know, you have someone that is an expert that can give you some sound advice on those matters. So, um, like Nicole said, it is an investment, but it is an investment well spent.

Nicole Durio: Yes. And Tiffany, you know, uh, one thing people often ask me, you know, when, when should CPA?

My response is always. You have to know and understand your threshold for a financial mistake. And if it’s something you’re not willing to risk, I would definitely consider investing in the services of a CPA. I love

Tiffany Grant: that. I love that. Um, yeah, cause I mean, honestly, a bookkeeper can only get you so far cause really all they’re doing is making sure your books in it.

are in order. As far as I know, I don’t really know any bookkeepers that go into tax planning and things like that. Um, and so you definitely want to kind of upgrade at some point just to make sure that you are covering. Which is which most of the time is a blind spot Uh, so I completely agree with you nicole Now if people were interested in finding out more about you your services or any more information about Tax planning versus tax preparation.

Where could they find you?

Nicole Durio: Yes, if they go to madisonbrothers. com They will see me there. That’s m a d i s o n Brothers spelled out with an S on the end, B R O T H E R S dot com. And all of my contact information is there. And they can email me as

Tiffany Grant: well. Awesome. Awesome. And I’ll make sure that I have that link in the show notes for you all.

So don’t feel pressured if you didn’t get all of that, uh, definitely check out the show notes and it’ll be right there. So thank you so much, Nicole, for coming on the show today. This was really great information. Thank you.

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