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Formal Tax Planning

Formal Tax Planning

Informal tax planning vs formal tax planning, there is a substantial difference between the two levels of service. In my thirty years of practice and at my firm, Joseph F. Fragnoli, CPA, PC in Nashville, TN, we have focused my service on tax preparation, and I’m very proud of the work we have been able to do. Along the way, we’ve been able to do some, what I will call, informal tax planning, and given clients some recommendations that have created some nice savings. In California, I have assisted clients with incorporating to reduce some of the self-employment taxes they were incurring as a sole-proprietor saving them thousands of dollars per year in taxes. I have advised people on late year equipment additions taking advantage of section 179 asset expense deductions and so on.

But that sort of informal advice isn’t good enough anymore. Taxes have gone up – in 2013, the top rate went up and Obamacare taxes on investment income kicked in. Many of my clients and others are making more money now, too. So it really is time to do some formal tax planning. I feel that this service and specialization is so critical in our current economic and tax environment that I separated this service from the rest of my CPA firm’s services and formed a company that is specifically focusing on formal tax planning, Pinnacle Tax Planning Services, Inc.

It’s one thing to spot an opportunity and perform a quick tax projection. But formal tax planning involves proactive changes, like establishing a medical expense reimbursement plan, hiring your children to perform basic business tasks for you proprietorship, establishing a more sophisticated retirement plan and many more. A formal plan starts with strategic ideas, but then we have to implement those ideas and maintain whatever structures we set up. There’s a lot of work that goes into making those savings really happen. It’s like when you go to the doctor. They can write all the prescriptions you want – but if you don’t go down to the drugstore and fill them, they won’t do you any good.

I’ve always been happy to include informal planning as part of my tax-prep fees. But formal planning is different. It is far more complex and includes strategic planning, implementation, monitoring and continued review. While this service comes at a fee, we will be able to show you how it really costs you less than nothing  because you’ll pay for it with a fraction of your savings. I frequently tell clients that you can make my firms a profit center or a cost center. If I could tell you about an investment idea that guarantees you a return of 10% and it is fully vetted and legitimate, would you invest in it. Well, think of a formal tax plan as an investment. But, the return can be hundreds of percent of the investment and your satisfaction is guaranteed. First, after an initial free interview and review of your prior years (2) tax returns if I don’t think I can save you multiples of my fee, we go not further. If I believe that we can save you multiples of our fee, I will quote you a retainer fee that is paid up front. When we are finished putting together the formal tax plan, we meet again and I discuss with you some of the general ideas and the projected tax savings based on historical numbers and current year projections. If you like the result, I hand you the formal tax planning document. If you are not satisfied, I hand you a full refund check instead. What do you have to lose but an hour or two of your time. But, the returns can be fantastic. So, why wouldn’t you or your business not want to make this investment!

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