Selling a business is one of the most important financial and emotional decisions an owner can make. Whether it’s a small family-run shop or a growing enterprise, the process involves far more than finding a buyer and agreeing on a price. Proper preparation can significantly increase the value of the sale, reduce risks, and ensure a smooth transition. Understanding what to expect before putting your business on the market can make the difference between a successful exit and a stressful, undervalued deal.

Understanding Business Valuation and What Your Business Is Really Worth

One of the first steps in selling a business is understanding its true value. Many owners overestimate or underestimate what their business is worth because they base it on emotional attachment rather than financial reality. Business valuation is typically based on revenue, profit margins, cash flow stability, market trends, and comparable sales in your industry.

Professional buyers and investors often use methods such as EBITDA multiples or discounted cash flow analysis. If you want a deeper reference on valuation methods, Investopedia provides a helpful guide at https://www.investopedia.com/articles/pf/12/how-to-value-a-business.asp.

A strong valuation is not just about current profits. Buyers also look at future potential, consistent earnings, and how dependent the business is on the owner. Businesses with stable growth and diversified income sources generally command higher offers than those reliant on a small number of clients or unpredictable revenue streams.

Financial Preparation and Clean Record-Keeping

Before selling, your financial records must be accurate, transparent, and easy to verify. Buyers will carefully review several years of financial history, and any confusion or inconsistency can reduce trust and lower your valuation.

Clean financial preparation usually means ensuring your profit and loss statements are complete, your tax filings are up to date, and personal expenses are separated from business accounts. Many owners also need to adjust their financial reports to show the true earning potential of the business by removing one-time or personal costs.

When financial records are clear and well organized, due diligence becomes faster and more efficient, which increases buyer confidence and can even improve the final sale price.

For general small business preparation guidance, the U.S. Small Business Administration is a useful resource at https://www.sba.gov.

Legal Readiness and Reducing Hidden Risks

Legal structure and compliance play a major role in how smoothly a business sale progresses. Buyers want certainty that the business is properly registered, contracts are valid, and there are no unresolved disputes that could become future liabilities.

This includes reviewing employee agreements, supplier contracts, lease arrangements, and any intellectual property ownership such as trademarks. Even small legal uncertainties can create hesitation for buyers or lead to price reductions during negotiations.

Having a legal professional review your documents before listing the business can help prevent last-minute issues that might delay or derail the sale.

Timing the Market and Choosing the Right Moment to Sell

Timing can significantly influence the value of your business. Selling during a period of strong performance or favorable industry growth typically leads to higher valuations, while selling during downturns often reduces negotiating power.

External conditions such as interest rates and buyer demand also matter because they affect how easily buyers can secure financing. However, internal readiness is just as important. A business that relies heavily on the owner is often harder to sell than one that can operate independently through trained staff and clear systems.

The best time to sell is usually when the business is stable, growing, and not under pressure to be sold quickly.

Making Your Business More Attractive to Buyers

Buyers are not just purchasing past performance—they are investing in future stability. A business that operates smoothly without constant owner involvement is far more appealing and often sells for a higher price.

Improving attractiveness does not always require major changes. It can involve documenting how the business runs day to day, ensuring staff can handle key responsibilities without supervision, and reducing dependency on a few major customers.

Operational independence is one of the strongest value drivers in any sale because it reduces perceived risk for the buyer.

Finding the Right Buyers and Advisors

Not all buyers are the same, and finding the right one can influence both price and deal structure. Some buyers are competitors looking to expand, while others are investors or first-time entrepreneurs entering the industry.

Many owners choose to work with business brokers or mergers and acquisitions advisors who help identify qualified buyers, manage confidentiality, and guide negotiations. While this comes at a cost, it often results in better offers and a more structured selling process.

Maintaining confidentiality throughout the process is essential to protect relationships with employees, customers, and suppliers.

Negotiation Challenges and Common Mistakes to Avoid

Negotiation is often one of the most difficult parts of selling a business because it involves both financial and emotional factors. Owners may feel attached to their business and struggle to evaluate offers objectively.

Common mistakes include setting unrealistic price expectations, focusing only on the headline price instead of deal structure, or failing to understand tax implications of the sale. In many cases, payment terms, transition periods, and performance-based conditions can be just as important as the final number.

A flexible but informed negotiation strategy usually leads to better long-term outcomes.

Preparing for Due Diligence and Buyer Scrutiny

Once a serious buyer is involved, they will conduct due diligence to verify every aspect of the business. This includes financial records, contracts, employee information, and legal compliance.

This stage is often where deals slow down or fail because of missing documents or unclear data. Preparing in advance by organizing records and ensuring transparency helps build trust and keeps the transaction moving smoothly.

A well-prepared business can complete due diligence faster and with fewer adjustments to the original offer.

Turn Your Business Exit Into a High-Value Opportunity

Selling your business should be a planned strategic move, not a rushed decision. The strongest outcomes come from early preparation, clean financial records, strong operational systems, and a clear understanding of market value.

If you are considering selling your business, now is the time to improve your financial clarity, reduce operational risk, and evaluate your readiness for buyers. Speaking with a qualified business broker or mergers and acquisitions advisor can help you position your business more effectively, attract serious buyers, and negotiate a stronger deal. The earlier you prepare, the more control you have over your exit—and the higher the value you are likely to achieve.

If you’re a business owner, the decision to sell your company is one of the hardest and most significant in your journey as an entrepreneur. Selling your business is about more than just financial gain. It’s also about preserving your legacy, as well as the timing of preserving your personal and professional goals. If you have the right guidance, you can achieve a smooth transition that aligns with those goals. It can lead to a buyer who respects your vision for the company.

Knowing When to Sell Your Company

Many entrepreneurs hope to sell their business at the right moment. But market conditions, industry trends, and personal circumstances may not always cooperate. If you wait too long or move forward too quickly, your business could lose value. You could also miss opportunities or face an uncertain future for your company. If you sell your business during an economic downturn, it could be undervalued. You may also find yourself unable to prepare for the financial, operational, and legal complexities of a sale.

Because there’s rarely a perfect moment to sell your business, the decision often comes from a compromise between personal circumstances and economic realities. That’s why you need to be clear about your main objectives. Do you want to remain part of the operations after the sale has completed, or do you prefer to step away entirely? Determining these goals early on will help you shape buyer discussions and will influence deal dynamics.

Choosing the Right Investment Banking Team

If you’re a business owner who is thinking about selling your company, you should speak to an investment banking firm. They will take the time to understand your priorities, evaluate your circumstances, and come up with a strategy that aligns with your goals. Their expertise can help you maximize value, anticipate risks, and make sure your company continues to thrive under its new owners.

It’s important to speak to an investment banker early in the process. Not only will it guide the pre-transaction planning, but it will also help you to position your business in a way that will drive a competitive process and help you navigate the complexities of the transaction.

Deciding on a Buyer

Choosing the right buyer for your business requires careful evaluation and will be the primary responsibility of your investment banking team. A successful transaction should not only meet your financial expectations but should also align with your company’s values and long-term goals. That’s why you need to put together a compelling narrative about your business’s trajectory, unique strengths, and growth opportunities that could be unlocked with the extra capital. Advisors and bankers can help you to qualify and present these opportunities in a way that will attract the right buyers.

One of the most important considerations is whether the buyer fits with your company culture. Will the new owners preserve the business’s reputation and values? If maintaining employee morale and customer loyalty is important to you, it’s important to find a buyer with a similar vision. The buyer should also be able to meet the purchase price and provide additional capital so the company can continue to grow.

Preparing for the Sale

Once you have found the right investment banking firm and a buyer that meets your business goals, you need to find a team of trusted advisors. While audited or account-reviewed financials aren’t always required, they can streamline the sales process. Having an experienced attorney and accounting firm is important for making sure that financial statements are accurate, timely, and ready for an audit. They can also be helpful in reviewing entity agreements as well as in optimizing legal and accounting functions.

Taking care of outstanding liabilities, risks, or legal issues early on can prevent any disruptions during your negotiations with buyers. A sell-side Quality of Earnings report that includes pro forma adjustments for one-time or structural changes can have a significant impact on your company’s valuation and the confidence of prospective buyers. Prioritizing important performance metrics that can improve your company’s value can strengthen its position ahead of a sale.

It’s also important to thoughtfully plan the transfer of wealth, because it can have significant tax implications. Collaborating with experts in wealth strategy and investment banking can be helpful in the structuring of ownership (especially if you want it to be done in the most tax-efficient manner). Doing this will make sure that the sale of your business aligns with your personal goals.

If you’re looking for a CPA in Corpus Christi that can help you with the sale of your business, be sure to get in touch with Jennings & Hawley.

Retirement is more than just a stage in our lives. For most people, it also refers to a change in our relationship with money. Most of us will make the transition from earning a regular income to living off of our accumulated savings, which may include any of the following:

• Pensions.
• 401(k) plans.
• Individual Retirement Accounts (IRAs).
• Investment accounts.

If you want to know what your retirement may look like, there’s a lot to consider — from how long you want (or need) to work to where you may live and how you may want to spend your free time. If you want to optimize your security and financial freedom during your retirement years, you will need to plan ahead.

The Purpose of Retirement Planning

The term “retirement planning” refers to the ongoing process of setting financial goals and strategies to make sure you have enough savings and income to support yourself when you retire. It involves saving, investing, and adjusting your plans to stay on track. You will also have to consider other factors (such as inflation, market changes, and personal circumstances).

There are certain account types (such as IRAs) that are built for retirement savings. They allow you to contribute a portion of your income with the goal of growing it over time through investments in stocks, bonds, and other assets. You should take the time to understand the different types of retirement savings accounts to see which ones work best for you.

When it comes to saving for retirement, your goal will be to build a sustainable nest egg that you can eventually withdraw from. This money will be used to cover your living expenses and to maintain your lifestyle during your retirement years. If you start early and contribute to it on a consistent basis, you can take advantage of compound interest (which can significantly boost your savings over the long term). It can also help you achieve more financial stability and peace of mind when you retire.

How to Plan for Retirement

Whether you’re a few decades or a few years away from retirement, having a plan will help you feel more confident that you’ll be ready when the time comes. You may be thinking about getting some financial advice to help you with your retirement planning, or you may feel comfortable doing it on your own.

Regardless of where you are in your journey, here are some things you can do to help you plan for retirement:

• Figure out when you may have enough money to retire — Deciding when to retire is far from simple, but running some numbers and determining your monthly expenses can give you a good idea of where you stand. Think about how you want to live when you retire, look at what you’re spending, and figure out where your income is coming from.
• Make a plan to pay off your debts — Taking a look at your current financial status is an important step in retirement planning, because it will give you a clear picture of where you stand. If you have a clear understanding of your current savings, outstanding debts, and future expenses, you can determine how much you need to save and how to allocate your resources more effectively.
• Set up your savings to get you to your financial goals — You most likely have a goal in mind for how much you need to save to be comfortable during your retirement years, and the best way to reach it is to break it down into small increments. Because of compound interest, even small monthly contributions to your retirement savings can add up over time.
• Choose and monitor your retirement investments — Choosing the right retirement investments is an important part of building a secure financial future, and you can start by diversifying your portfolio to spread out your risk. Stocks can give you big returns, but they have a great deal of volatility. Mutual funds and ETFs make it easier to achieve the benefits of portfolio diversification, because they’re professionally managed.

Because there are so many things to consider, many people see the value of hiring a financial professional for their retirement savings plan. This person can help you navigate the complicated world of investing, come up with a strategy that’s designed to meet your financial goals, and give you valuable insights on how to maximize your savings.

If you’re looking for a CPA in Corpus Christi that can help you come up with a strong retirement planning strategy, be sure to reach out to Jennings & Hawley.

Everyone knows that the American tax system is complicated, which is why it shouldn’t be any surprise that there are misconceptions about taxes that can lead to serious financial consequences. Not only can it cost you thousands in penalties, but it can also result in missed opportunities. If you make decisions based on hearsay instead of listening to the advice of a tax professional, you can fall into any one of these traps.

Here are some common tax myths that can cost you thousands.

#1: The Rich Don’t Pay Taxes in the United States

Like any other country with progressive income tax, Americans with a higher annual income will pay higher income tax rates. Half of American taxpayers pay 97% of all income taxes, with the top 1% of earners paying over a third of all income taxes.

There are some types of taxes where low-income earners contribute to a larger share of their total value. Some of them include the following:

• Payroll tax.
• Sales tax.
• Excise tax.

If you take all the taxes being paid in a single year, you will find that the American tax system is very progressive. So, higher income earners will pay the most in federal taxes.

#2: There’s No Law in the United States That Requires You to Pay Income Tax

While it’s important for taxpayers to ask questions and understand their rights, the 16th Amendment (which was ratified in 1913) allows Congress to impose an income tax. The Internal Revenue Service (IRS) also established the following:

• Imposing a tax on the taxable income of every individual.
• Defining taxable income as gross income minus any allowed deductions.
• Defining gross income as “all income whatever source derived.”
• Requiring the filing of returns by every individual with gross income for the year (with a few exceptions).

There have been a number of court cases that have represented every argument, and every court has upheld the power of the federal government to collect income taxes.

#3: A Large Tax Refund is a Cause for Celebration

Everyone likes to get a check in the mail. But if you’re one of the millions of taxpayers who got a tax refund last year, you should think twice before you decide to celebrate. If you get a large tax refund, it means that more money is being withheld from your paycheck than is necessary. In 2018, the IRS issued more than $390 billion in refunds to more than 120 million taxpayers.

A growing number of people got a refund because they got more back in tax credits than they owed in tax liability. Some may argue that it’s a safe and easy way to save money, but you should think about it another way. If you got a refund at the end of the tax year, it means that you’re giving the government an interest-free loan for the entire year. You would be better off putting the money that you’re overpaying in taxes into a savings account.

#4: Large Corporations Don’t Pay Any Taxes

In some years, there were corporations that didn’t pay any federal income taxes. But it wasn’t because they found “loopholes” in the system. There are a number of legitimate reasons why a “profitable” corporation shouldn’t have to pay income taxes. But for the most part, this misconception comes down to two factors. One is a misunderstanding of how corporate income tax is defined, and the other is a misunderstanding of how it’s taxed.

There’s a good reason to believe that many of the corporations that you think are profitable won’t do the same this year, because many companies report what’s referred to as “book income” on their financial statements (which follows typical American accounting standards that are designed to make the company look as profitable as possible).

The American tax code has different accounting rules. Government agencies use what’s referred to as “taxable income,” which looks at three important factors:

• A company’s net operating losses — The American tax code allows companies with losses on one tax year to deduct them from their profits in future tax years. This can keep corporations with long-term net losses from being taxed.
• Where a company earns its profits — Many large corporations that operate in the United States do business in many different countries, and the IRS offers credits for the taxes they have to pay to foreign governments.
• How much a company invests in equipment and machinery — The most important difference between book income and taxable income is in how capital investments (such as the purchase of new equipment and machinery) are treated. Typical accounting standards only treat a small percentage of capital purchases, but the American tax code allows corporations to treat a much larger percentage of the same investment.

If you’re looking for a CPA in Corpus Christi that can help you gain a better understanding of the American tax system, be sure to reach out to Jennings & Hawley.

Understanding business entities and their tax structures can save you a great deal of time, money, and potential headaches later on. Limited liability companies (LLCs) and S Corporations (S Corps) are often talked about when it comes to business entities, but it’s not as simple as choosing between one or the other.

Unlike a C Corporation (which taxes shareholders separately from the entity itself), LLCs and S Corps are often subject to only one layer of taxation at the owner level (which can provide a significant amount of tax savings throughout the life of a business).

An LLC is one of the four main legal business structures, while an S Corp is simply a tax classification. That’s why it’s so important to know the differences between them and to understand when and how they may apply.

Tax Considerations

Similar to S Corporations, LLCs, and partnerships are considered to be “pass-through” entities, where the business’s income and expenses flow through to its partners and are reported on their personal tax returns. The entity itself doesn’t pay taxes. The company’s profits, losses, deductions, and credits are passed through to the owners. Because the profits are only taxed at the personal level, you can avoid “double taxation” (which is something that corporations face when they pay corporate income tax).

LLCs and S Corporations treat self-employment taxes differently as well, which are different from income taxes because they apply to the net earnings of the business. The shareholders in an S Corporation aren’t subject to self-employment tax, but the IRS does require them to pay shareholders who contribute substantial services for a “reasonable” salary (which will be subject to payroll tax).

Rental Real Estate Considerations

It’s common for LLCs to own rental real estate, because it offers asset protection. It also limits personal liability, provides a flexible management structure, and allows the company to have an unlimited number of owners. It can even make it easier to attract capital investments and to extend several important tax benefits, but it’s not as common for S Corporations to own real estate because they can inhibit flexibility when distributing property to the owners.

Both LLCs and S Corporations allocate profits and losses according to the percentage of ownership, but the members of an LLC can choose to make “special allocations.” This will allow profits, losses, and other tax benefits (such as depreciation) to be passed through to each member that’s not based on the percentage of ownership. This extra flexibility gives LLCs a strategic advantage over S Corporations.

If you have (or plan to have) more than one rental property, it may be a good idea to set up a separate LLC for each property because all the assets of an LLC are “exposed” if there’s a lawsuit. Insulating both the owners and any other properties you own if there’s a legal dispute can be an advantage. Be sure to speak to a qualified attorney for more information.

Pass-Through Entity Tax Elections

The pass-through entity (PTE) tax elections allow both partnerships and S Corporations to choose to be taxed at the entity level, but only for state income tax purposes. The primary benefit of a PTE election is the federal “deductibility” of any state income tax that’s paid by the entity.

Individual owners of PTE’s can take advantage of a federal tax deduction of state taxes on their pass-through income allocation, which allows them to avoid the $10,000 Federal 1040 Schedule A limit on itemized deductions of state income tax payments. This is more commonly referred to as the state and local tax (SALT) gap. Each state has its own eligibility requirements and PTE election regime that need to be looked at more closely.

Choosing the Most Tax-Efficient Business Structure

Choosing between an LLC and an S Corporation is more than just a tax decision. It’s a strategic choice that can affect your business’s growth, operational flexibility, and long-term success. Both structures have their own set of advantages, but the right choice depends on a careful analysis of your company’s specific needs, goals, and circumstances.

Tax planning is an ongoing process. As your business grows, it’s important to reassess your entity structure and tax strategies to make sure you’re optimizing your tax position. If you have the right tools and professional guidance, you’ll be better able to navigate the complexities of business taxation.

If you’re looking for a CPA in Corpus Christi that can help you with your company’s tax efficiency, be sure to reach out to Jennings & Hawley.

In today’s financial landscape, managing your personal or business finances can be overwhelming. Some people choose to handle their accounting and tax preparation on their own, but working with a Certified Public Accountant (CPA) can offer several advantages. Whether you’re an individual, a small business owner, or someone with specific financial needs, a CPA can bring expertise, accuracy, and peace of mind to your financial future.

As your wealth and assets grow, your finances will become more complex. It can be harder to keep up with account management, financial records, and tax regulations that seem to constantly change. That’s why you need to hire a CPA to help you with your finances — a financial advisor who can help you come up with a strategic plan for managing and maximizing your wealth.

Here are some of the ways that a CPA can help you manage your money, so you can reach your long-term financial goals.

#1: Bookkeeping and Payment Tracking

Whether you’re an individual or a business owner, keeping detailed records of income and expenses is important to your financial health. It’s not the most exciting task, but it has to be done. An experienced CPA can make sure that your books are accurately maintained every month and throughout the year, which will allow you to focus on more important tasks.

#2: Long-Term Strategic Financial Planning

You have long-term financial goals, and a good CPA can help you achieve them. If you have a clearer picture of where you want to go, a trusted financial advisor can look at your assets and circumstances while helping you come up with a solid plan. By looking at the current landscape and your financial situation, you and your CPA can come up with a long-term financial plan that will work for your budget and lifestyle.

#3: Retirement Planning

One of the most important financial responsibilities is planning for your retirement. You want to make sure that you can not only be comfortable during those years but that you can also leave a legacy for your family and loved ones. Thinking about your finances in the upcoming years or decades can seem overwhelming, but a CPA can help you forecast your expenses and can guide you on the best investment path for maximizing your retirement account returns.

#4: Cash Flow Management

You need to have positive cash flow to maintain your lifestyle and your business. That’s why managing it is so important to your overall success. If you want to improve your cash flow, you need to have a CPA who can help you strategize your spending, build up your savings, and generate better profit margins.

#5: Tax Accounting and Audit Assistance

Many people hate tax season, but they hate the idea of a tax audit even more. If you hand off your tax preparation and filing to a CPA, you can be sure that your tax return will be completed accurately and on time. You can also be sure that you can take advantage of the maximum allowable tax deduction and credits.

If you’re worried about an audit, a CPA can look at your tax documents with the same level of scrutiny as the IRS. If there are any issues or red flags, your CPA can help you take care of them before your return is filed. They can also help you if the IRS decides to audit your return.

#6: A Higher Professional Standard

You want to have the most experienced financial professional to help you manage your money, and a licensed CPA will have a higher professional standing than other accountants. With this kind of prestigious certification, he or she has met certain educational requirements and has passed a rigorous state exam.

Unlike other accountants, a CPA will be able to represent clients in front of the IRS. He or she will also be able to prepare and file financial statements with the Securities and Exchange Commission (SEC), which is a necessity for owners of public companies. CPAs have agreed to abide by a code of ethics and to prioritize their clients’ best interests.

If you’re looking for a CPA in Corpus Christi that can help you manage and secure your financial future and reach your financial goals, be sure to get in touch with Jennings & Hawley. We have a team of experienced professionals who would be more than happy to speak with you about your specific needs.

Financial expertise is a critical part of success for any startup business, so business owners should consider hiring a CPA (even when the company is still in its early stages). CPAs do more than just tax preparation. They can also offer strategic financial planning and advice. They can even provide compliance assistance that can be valuable for any new business. Understanding the role of a CPA and how he or she can enhance your company’s operations will help you make more informed decisions about when and why you should work with one.

The Roles of a CPA in a Startup

CPAs can add value to a startup in the following areas:

• Strategic Financial Planning — They can help startups create a strategic financial plan that aligns with their business goals. They can also provide insights about budgeting, cash flow management, and financial investing.
• Tax Planning and Compliance — They can make sure that startups comply with tax laws and are able to take advantage of any applicable tax benefits. This can include preparing and filing tax returns as well as giving advice on tax-efficient strategies.
• Accounting and Bookkeeping — They can set up accounting systems and controls, manage bookkeeping, and prepare financial statements that can help startups keep track of their financial performance.
• Audit and Assurance Services — They can perform audits and reviews, as well as offer assurances to investors and stakeholders about the accuracy of a company’s financial statements. They can also provide information on the financial health of the business.
• Business Financing and Structure — They can help business owners structure their company in a way that will maximize their operational efficiency while minimizing their tax liability. They can also help startups to navigate funding rounds, assess their financial options, and to prepare for any negotiations with investors.

Be sure to speak to a financial professional for more information about the roles a CPA can play in your startup business.

How a CPA Can Benefit a Startup

CPAs can benefit a startup in a variety of ways. They can provide expert financial advice, which can give a company invaluable insights into its financial management systems. They can also come up with solutions that are not only based on the standards and best practices of a specific industry but are also tailored to the needs of that specific company.

CPAs can also give a startup more credibility with stakeholders in the following ways:

• Trust and Assurance — Financial statements that are prepared or audited by a CPA add more credibility to a startup’s financial claims. This is an important part for attracting investors, lenders, and partners.
• Professional Representation — CPAs can represent a startup in any discussions with banks, investors, and other financial stakeholders. They can also make these interactions more professional.

With regard to tax compliance and savings, CPAs can be beneficial in the following ways:

• Strategic Tax Planning — They can help startups to navigate the intricate web of tax laws. They can also help them identify tax-savings opportunities and avoid any pitfalls. They can ensure the accuracy of all tax documents and that they’re filed in a timely manner (which will be helpful in minimizing tax liabilities and penalties).
• Proactive Tax Approach — They can help startups plan for any tax implications that may come up later by offering advice on any future business decisions.

CPAs can also be helpful in managing company resources. They can come up with strategies that can help companies to manage and optimize their operations, which will maximize their use of resources while minimizing waste. They can even help companies come up with detailed budgets and forecasts, which can help startups to manage their finances more proactively.

How to Find the Right CPA for Your Business

The first thing you should do is determine what types of services your company needs from a CPA. You also want to find one with experience in your industry and with startups of a size or stage that’s similar to yours. Be sure to check their credentials and ask for references.

You want to set clear expectations about what you need from a CPA. Regular communication can make sure this person is aligned with your business goals. You also want to take full advantage of his or her expertise — not just with regard to accounting and taxes. Ask the CPA for strategic advice about any financial decisions and business planning.

If you own a startup and are looking for a CPA in Corpus Christi that can

Taxes are an important part of your financial picture, so getting sound advice and guidance as you file your tax returns is one of the most important parts of your financial plan. You might have heard of tax planning and tax preparation. While both terms are often used interchangeably, they’re drastically different. They vary in their scope and goals. They can also be different in terms of their impact on your financial goals.

The Main Difference Between Tax Planning and Tax Preparation

Tax preparation involves the process of gathering your tax information, completing your tax forms, and filing them with the IRS. It also involves the filing of any state returns that may be required. You can do your own tax preparation, or you can hire a professional to do it for you. Tax planning is an ongoing process that explores strategies for minimizing your future tax liability.

What Tax Planning Involves

Tax planning isn’t just a one-time event. It can happen over many years to make sure you pay the least amount of annual tax (all while trying to achieve your financial goals). Tax planning can apply to many areas of your financial life. Some of them include the following:

• Portfolio management.
• Income strategies.
• Deduction maximization.
• Charitable giving.
• Retirement savings.
• Withdrawal strategies.
• Estate planning.

Be sure to speak to a financial professional for more information.

How Tax Preparation is Different from Tax Planning

Tax preparation focuses on the completion of your tax return. This includes gathering documents, completing the necessary forms, and filing returns with the appropriate tax authority. By obtaining the proper documents, you can have all the information you need to report and support your sources of income (along with all the deductions you had throughout the year).  This information can be used to file your federal and state returns.

Once the forms have been completed, they can be filed with the appropriate tax authorities. Your federal return should be filed with the IRS, while your state return must be filed with the appropriate tax office. Most people choose to work with a professional tax preparer, but you can file your own tax returns with one of the many tax preparation tools on the market.

Comprehensive Tax Planning Strategies

Some of the specific tax planning strategies include the following:

• Income Timing — This strategy controls your income tax liability by moving your taxable income out of (or into) a specific calendar year. The goal is to defer taxable income to a future date while moving deductible expenses into the current fiscal year.
• Tax-Advantaged Savings — This strategy is similar to income timing because it can reduce your taxable income, but it’s done through tax-advantaged savings. This includes saving for retirement and Health Savings Accounts (HSAs).
• Charitable Giving Strategies — A deductible charitable contribution is money or goods given to a federally-recognized organization that’s tax-exempt when you expect nothing in return. However, there is a limit to how much of your adjusted gross income you can deduct for charitable contributions.
• Asset Location Strategies — This strategy can help you reduce your investment taxes. You spread your investment portfolio across many different accounts with different tax treatments. The goal is to hold less tax-efficient assets (such as bonds and bond funds) in tax-advantaged accounts and to hold more tax-efficient assets (such as ETFs) in accounts that don’t have any special tax treatments.
• Roth Contributions and Conversions — If you make contributions or conversions to these accounts, you can pay more taxes today so you can save on your tax bill later on. Roth IRAs are retirement accounts that are contributed to with after-tax dollars, so their financial benefits come later.
• Tax-Loss Harvesting — No one likes to see their investment portfolio lose value, but markets don’t move in a straight line. It goes through a series of ups and downs during a typical market cycle. Tax-loss harvesting tries to take advantage of the downs by using investment losses to offset capital gains.

Be sure to speak to a financial professional for other ways that tax planning can benefit you and your financial future.

Integrating Tax Planning with Your Tax Preparation

While they’re two different disciplines, they’re closely related parts of a comprehensive tax strategy. A good tax planning strategy can help you with the tax preparation process, because you’ll be better able to gather the necessary documents and identify any opportunities for reducing your tax liability. It will also make sure you’re compliant with current tax laws.

If you’re looking for a CPA in Corpus Christi that can help you come up with a solid tax strategy, be sure to reach out to Jennings & Hawley.

Because your business takes up much of your time and responsibilities, you may be tempted to postpone your retirement planning. But it’s an important step if you want to step away from your business. There is no set time to retire, but 42% of small business owners plan to do so at 65 or older (while 29% of them plan to do so between the ages of 55 and 64. Only 19% of small business owners plan to retire between the ages of 40 and 55. But whether your retirement is five years away or 15-20 years down the road, you can benefit by starting the planning process now.

When it’s time for you to enter your next phase of life, you need to have a plan that will help you to live comfortably in the future. You should think about retirement in four different phases, which include the following:

• Accumulation.
• Transition.
• Distribution.
• Legacy.

The accumulation phase starts when you’re still working. You then make the transition into retirement, where you distribute your assets for yourself and your loved ones before leaving a legacy for the next generation.

If you’re a small business owner, here are some strategies you can use to help you gain financial independence in the future.

#1: Define Your Retirement Goals

Retirement planning doesn’t happen overnight. It takes time to determine your retirement goals and accumulate enough assets to create enough of a financial cushion for when you retire. You should think about specific details (such as where you want to live, how much it will cost, the types of expenses you’ll have, and where you’ll get your retirement income).

You should start by answering the following questions:

• When do you want to retire?
• What kind of retirement do you want?
• How much money do you need to set aside?

Make sure your goals are written down, specific, measurable, and time sensitive. That way, you’ll know how to achieve them.

#2: Choose the Right Retirement Savings Plan

Once you have outlined all of your goals, it’s time to come up with a retirement plan. You can strengthen your retirement strategy and open the door to possible tax advantages by opening up retirement savings accounts. You want to find an option that will suit the needs of both you and your business, but you also want to think about how much financial independence you want to have when you retire.

Some of the most common retirement plans include the following:

• Traditional or Roth Individual Retirement Account (IRA) — A traditional IRA will allow you to make tax deductible contributions, and taxes are deferred until the savings are withdrawn. With a Roth IRA, the taxes are paid up front. So, you can have access to tax-free money when you retire.
• Simplified Employee Pension (SEP) IRA — An SEP IRA is a type of tax-advantaged retirement account that’s used most often by self-employed individuals. It can be either set up by employers or self-employed people and will allow them to make small contributions to the accounts.
• Savings Incentive Match Plan for Employees (SIMPLE) IRA Plans — This is another tax-advantaged account that’s designed for businesses with 100 or fewer employees, who can choose to contribute a percentage of their salaries to the plan. Employers also have the option to match up to a percentage of their salary.
• Solo or Individual 401(k) — If you’re a business owner, this plan can cover you and your spouse if that person is employed by the business. But it may not be an option if you have other people working for your company.
• Traditional 401(k) Plan — This is one of the more popular types of retirement plans that’s funded with employee contributions and matched contributions from their employers. They can also give business owners a great deal of flexibility on how they can structure the plan.

Be sure to speak to a financial professional for more information.

#3: Diversify Your Retirement Savings

Having both tax-deferred and tax-free savings may help with your current taxes and long-term planning goals. Take a look at your cash flow, tax situation, and long-term retirement goals so you can come up with a savings plan that’s right for you. You also want to diversify your investment selections within these accounts by not having a concentration of individual companies or industries so you can manage your risk.

#4: Come Up with an Exit Strategy

Once you have figured out what you want to achieve and have implemented a retirement savings plan, you need to come up with an exit strategy because you will eventually want to leave your business or turn over the day-to-day operations to someone else. It may take years of planning to shape the future of your business, but don’t leave it to interpretation before you retire.

If you’re looking for a CPA in Corpus Christi that can help you with your retirement planning, be sure to reach out to Jennings & Hawley.

Missing the tax deadline can be a stressful experience, but it’s not the end of the world. Whether you’re an individual filer or a business owner, knowing what happens next will help you take care of the situation while minimizing your financial consequences. If April 15 has already passed and you haven’t filed, you need to act immediately if you want to reduce your penalties. It’s also important if you want to avoid interest charges and stay compliant with IRS requirements.

The Consequences of Missing the Tax Deadline

If you mix the tax filing deadline, some issues can come up (depending on whether you owe taxes or expect a refund). If you owe taxes, the IRS may impose a Failure-to-File Penalty. It’s usually 5% of the unpaid taxes for each month (or part of a month) that your tax return is late, but this penalty can be up to 25%.

The IRS can also impose a Failure-to-Pay Penalty, which is 0.5% of your unpaid taxes per month. But it’s capped at 25%. It also grows in addition to the Failure-to-File Penalty. These penalties can add up quickly if you miss the filing and payment deadlines.

Other consequences for missing the tax deadline can include the following:

• Interest Charges — The IRS charges interest on unpaid taxes, and it starts from the day after the filing deadline. The interest compounds daily and continues to do so until the balance (including penalties) has been paid in full.
• Delayed Refunds — You won’t have to pay any penalties if you’re owed a refund and file late, but it may be delayed (which could affect your financial plans).

Missing a deadline even once can flag your account with the tax authorities, which could increase the amount of scrutiny around any future filings. For business owners, it could mean a higher risk of audits.

How to Address a Missed Tax Deadline

If you realized that you missed the tax deadline, you don’t need to panic. But you need to act as soon as possible, because you’ll be better able to mitigate the penalties and interest that can accumulate.

Here is a list of things you need to do if you miss the tax deadlines:

• File as soon as possible — Even if you can’t pay the full amount, filing your tax return as soon as possible will reduce your Failure-to-File Penalty.
• Pay what you can — Pay as much of the owed taxes as you can, because it will reduce the penalties and interest on the balance. The IRS has flexible options (such as payment plans) that can help taxpayers manage their balances. This can include a short-term payment plan (up to 120 days) or a long-term installment agreement.
• Request a penalty abatement — If it’s your first time missing a tax deadline, you can request a First-Time Penalty Abatement. This relief is given to taxpayers with a history of filing and paying on time. Contact the IRS to request this option, but you will need to file all past due returns and pay any outstanding taxes beforehand.

A tax professional (such as a CPA or enrolled agent) can help you negotiate with the IRS, set up a payment plan, and look at any penalty relief options for which you may qualify. They’re invaluable resources for businesses with complex filings or large balances.

How to Prevent Missing Tax Deadlines in the Future

If you don’t want to miss any more tax deadlines in the future, you’ll need to take an organized and proactive approach. Here are some tips that can help you:

• Mark Your Calendar — Keep track of any important tax deadlines (which are April 15 for personal taxes and March 15 for certain types of business filings). These dates might change in some years, so be sure to confirm the deadlines every year.
• File an Extension — If you’re not able to file your taxes by the deadline, you can request an extension by using Form 4868 (for individuals) or Form 7004 (for businesses). It will give you six extra months to file your return, but it doesn’t extend the deadline for any taxes you owe.
• Automate Your Payments — Set up automatic reminders or electronic payments to make sure you’re always on time with what you owe to the IRS and other state tax agencies.

If you’re looking for a CPA in Corpus Christi to help you manage your tax filing and payments, be sure to reach out to Jennings & Hawley.