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How to avoid surprises at tax time

The frenzy of tax season often brings financial anxiety and unwanted surprises. But working with a proactive CPA, you can transform tax preparation from reactionary to purposeful through year-round planning.  

Too often, we assume our taxes will simply work themselves out when that fateful April deadline looms near. Then boom - a major life event or investment decision from last year leads to confusion, missed deductions, and potentially large unplanned tax bills. 

Life Is Unpredictable

Everyone has those seasons in life - the times where you have a plan but circumstances take over and now you are working on Plan B or C.  These changes are unpredictable, but still should be accounted for.  Over the course of a year, you may experience many personal and professional changes that impact your taxes such as…

Selling a rental property:  When Jane sold her rental property investment for $400K after deducting past depreciation, she faced $30K in depreciation recapture taxes that she wished she had set aside money for.  

Buying rental property:  Hank purchased a rental condo and didn’t realize rental activities are considered passive income by the IRS, with different rules about loss deductions he should have factored in.

Selling stock:  Laura sold $100K in tech stocks from her portfolio after holding for less than a year and faced higher short term capital gains not realizing brokerage 1099 forms were sent to the IRS.

Gifting:  Miguel gifted his daughter $20K to help with student loans but neglected to properly file a gift tax return, leading to penalties. 

Selling a home:  When selling their house for $650K after 21 months of living in it as their primary residence, the Davis’ missed $50K+ in capital gains exemptions by not tracking home improvements better. 

Starting a business:  Launching her freelance business mid-year, Jamie missed deductions by not separating business use deductions from the beginning.

Getting married:  After their dream wedding, Robert and Michelle realized they lost deductions by not clearly tracking her sizable student loan interest payments.

Having a baby:  Following twins, the Abrams missed out on $4K dependent care flexible savings account funds due to enrollment period restrictions.

Even events that bring joy can come with unexpected consequences at tax time.  Meeting regularly with your tax advisor ensures they stay up to date with all the changes in your life  making it possible to predict the tax implications of these big moves.

Be Proactive, Not Reactive

The key is being proactive, not reactive. Working closely with your CPA at least twice per year enables you to foresee how major life events may affect your tax liability or opportunities. 

Rather than guessing how to handle tax consequences, together you can develop an intentional strategy optimized for your situation. This prevents unpleasant surprises down the road.

Planning Pays Off

Beyond avoiding surprises, proactive planning with an advisor maximizes all your hard work to accumulate wealth and assets. 

With expert guidance, you can thoughtfully time transactions, leverage tools like gifting, and take advantage of deductions - putting thousands of dollars back in your pocket.

Planning ahead by just a few months on a major business decision or investment sale can tremendously cut your tax burden and better position you for long term growth.

Transform Tax Prep into a Strategic Partnership

This tax season, change the way you think about your taxes. They don’t have to be a once-a-year source of frustration. By meeting with your CPA regularly and planning intentionally together, tax and personal finance management become an integral piece of your wealth-building strategy.

The outcome is clarity, confidence, and more money working for you and your priorities rather than disappearing avoidably through missed opportunities.

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