The Financial Harmony Blog

Fuel your mind and empower yourself with practical financial advice and business tips to better your business and achieve your goals.

The Ultimate Goal of a Comprehensive Tax Strategy? It's Not What You Think!

optometry practice profit strategy strategic planning Nov 19, 2024
comprehensive tax strategy

Here’s something that may surprise you. The ultimate goal of a good, comprehensive tax strategy is NOT to save taxes.

Let me explain.

Paying less in taxes is the byproduct of a comprehensive tax strategy.

There are tax professionals out there who are all about helping you save money on taxes. Their process may seem better than what you’ve had before. Especially if you had a tax preparer in the past. (Aka a tax pro who typically puts numbers in boxes, files forms, and takes the rest of the year off after April 15.)

There’s nothing wrong with either of these, per se. Except it isn’t helping you long-term.

The Wrong Focus Generates Bad Advice

Here’s the typical cycle. You work hard all year long. Working to increase revenue, improve cash flow, and build a successful practice.

You have others on your team giving you insight and advice. A financial advisor, practice management consultant, your office manager. All with your best interests in mind.

Towards the end of the year, you have a tax projection prepared. Whoops! Turns out all that hard work resulted in a bigger tax bill than you thought. You don’t have the cash to cover it.

The typical tax planner jumps into action.

Let’s prepay some expenses and defer some revenue into next year.

Replace some equipment. Need to go into debt to make it happen? At least you get the tax deduction.

Need a new vehicle? Not really? Well, if you change your mind and it’s over 6,000 lbs you can write the whole thing off...

These are all symptoms of a bad (or nonexistent) tax strategy.

These actions are actually a reaction. And a reactive tax plan won’t help you reach your goals. It is likely doing more harm than good.

Yes, your tax bill goes down. But what else happens? Your cash flow is still crippled. Your overall financial health took a beating. And for what? So you could spend a dollar to save forty cents?

The Real Result Of A Comprehensive Tax Strategy

This bears repeating - tax reduction is only the byproduct of a good, comprehensive tax strategy.

The real goal of this proactive approach is to increase your after-tax wealth.

What’s the difference? Take a look at a couple of simple examples.

  • Insulate money you are already making from unnecessary taxes. A properly optimized S Corporation is one example. One change in structure, plus the correct use of this tool, can save $3,000-$6,000 per year on average.
  • Use the money you are already spending and convert it to a legitimate tax deduction. I call these hidden tax deductions because they are hiding in your personal budget. Your personal vehicles, your home, and the money you spend to support your family are all eligible. Combing through these items can generate extra deductions from $10,000 to as much as $50,000 plus. Every year.
  • Instead of that new SUV, pump $57,000 per year into a self-directed retirement account. With nominal growth and a consistent strategy, you’ll have $1-$2 Million in 15 years or less. Do the math. Invest in almost anything you want except an asset that instantly starts losing value as soon as you buy it.

There are hundreds of other examples. This is the tip of the iceberg.

To do this properly, your plan for the next 1 - 5 years should be in place now.

Otherwise, you risk falling back into that typical, reactive cycle. Which spins your wheels for yet another year.

 

Eric Levenhagen, CPA CTS is the only financial consultant who helps private practice optometrists improve the financial health of their practice with a simple, proven process called Financial Harmony which will reduce their taxes and increase their after-tax profits by at least $30,000 in the first year, guaranteed.

THE FINANCIAL HARMONY NEWSLETTER

Achieve Financial Harmony

Get practical information to improve your business and achieve your goals.

You're safe with me. I'll never spam you or sell your contact info.