Locking the Barn Door

My Dad had a phrase, "That's like locking the barn door after the horse has been stolen." He used it when one of us tried to fix something after the damage was done. Timing is the key. Right now, blogs and tax writers are telling us about how to do some last minute tax planning to pay a little less in tax. While they won't help everyone, most of the suggestions are good and simple to do.

My concern is with the tax planning that isn't getting done, now or at any time of the year. These are the major, life changing events and it is surprising how many taxpayers don't think of them until it is too late. A few examples:

• Retirement
• Child leaving home (not just to school) or turning 17
• Starting Social Security (with or without retirement)
• Unemployment
• Starting a business
• Divorce
• Marriage

All these life events can cause a change in your taxes and generally not for the good. But, they can be planned for and adjustments made to withholding and estimates.

Try as I might, I can't predict a client's life. I might notice their age and ask about retirement or social security starting. Or, they might mention a child graduating or getting married. If it happens during their tax preparation interview, I can give them a projection based on the current year's info. If they don't have all the details, like with SS or retirement, I suggest a meeting when they have more info. I do have quite a few who do come in later.

It's the clients who don't come in or never told me about a change that are the most frustrating. They'll end up owing a balance due that they were not prepared to pay. On top of the tax, they could also owe the Underpayment penalty and if they can't pay their tax off, more penalties and interest. The large tax bill also makes it harder to plan and pre-pay for the next year.

If you are going to use a full service tax professional, use them. Give them a call if you have a question or may make a change in your life. They would rather suggest options now than give you a nasty surprise at tax time. I know I would.