Cash Flow Planning for Life - Helping you reach your personal & professional financial goals.

Cash Flow Planning for Life

Helping you reach your personal & professional financial goals.

Tax Planning is a Year Round Activity

Posted by Mark On December 16th

I work with a number of business owners who, over the years, have learned tax planning CANNOT be done effectively in February, two months after most year-ends.

Tax Planning

This is part 2 in my 7 part series “7 Things Every Small Business Owner Needs To Know”.  You can download this entire series in my eBook on my web site –

Tax planning is a year round activity.

Questions such as:

  • Is the business making a profit or losing money?
  • What is the revenue recognition policy? Is it the correct policy for the industry (there are a number of ways to recognize revenue depending on your industry)?
  • What is the capitalization policy of the business? Is it being followed?

I save most new clients my first year’s professional fees, in reduced property taxes, just by reviewing and adjusting the capitalization policy of the company.

Is the business taking advantage of any and all tax elections that can or should be made in a given year (i.e. IRC section 179; expensing of capital assets)?

If your business is established, the last few years have most likely been very difficult and your business has probably incurred losses.

Management of those losses is critical.

I have spent the last 18 months working with business owners to make those losses as large as legally possible to create more income/profit. Yes, create income/profit!

Most small businesses are set-up as a pass-through entity (LLC/partnership or small business corporation aka S-Corp), meaning the owners/partners of the business pays any income tax due for the business.  When the business is generating losses, over and above other income the owners/partners have included on the individual tax returns, a net operating loss (NOL) is generated for that year.

How you treat the NOL is beyond the scope of this eBook, however when an individual has a net operating loss most itemized deductions (Schedule A, on their 1040) and your personal exemptions are lost, not able to be carried forward or back to a subsequent tax year.

Depending on the amount of real estate taxes, mortgage interest and personal exemptions the business owner is allowed, the tax deductions and dollars lost in not being able to offset them against other income can add up quickly.

If you have any questions, please give me a call at (239) 384-9688 or visit my web site at:

– Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change.  We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER:  The information within this eBook is for informational and educational purposes only and is not tax advice and should not be used as such.  The facts of each individual situation can have significantly different outcomes when applying tax law.  The hiring of a CPA is an important decision not to be based solely on advertisements.

1 Response

  1. 7 Things Every Small Business Owner Needs To Know | Cash Flow Planning for Life Says:

    […] Tax Planning IS A Year Round Activity […]

    Posted on February 15th, 2010 at 11:37 pm

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