The Problem: High business profitability and rapid growth led to high tax liabilities due to both IRS and CA FTB, due to lack of tax strategy.
Analysis of Alternatives: Hire a financial advisor to advise on personal tax planning. Continue to pay high tax liability resulting in large cash outlay once in the year. Buy a bunch of supplies & spend money to lower taxable income, without a long-term strategy.
Recommended Solution: Understanding client’s long-term goals of continuing to grow the business while open to investment opportunities, our team established a planning structure for the client. This added-value service was implemented so we could review his personal & business financials comprehensively. This started with educating the client on the tax implications of an S Corp type business.
Implementation: Review financials regularly with client, setting benchmarks against historical and establish a schedule to assess YTD financial profitability. Identify client’s other/outside investments and entities that materially impact tax liability to plug into schedule to estimate tax liability quarterly. At each checkpoint, advise client of estimated tax payments to make along with potential alternative options, depending on the current long-term goals for client both personally & for the business.
RESULTS: Establishing a tax strategy built alongside the client gave the client confidence that there would be no surprises come tax season. Management is now well-versed in financial & tax implications and investing in commercial property as next step to build wealth.