Did you know there’s a big difference between minimizing your taxes and optimizing them? Just because you pay the least possible tax doesn’t guarantee you’ll end up with the most money afterward.
What usually happens is that investors and managers structure important business transactions, and then (if at all) bring in tax professionals to figure out how to save as much as possible on taxes. This leads to a lot of lost time and missed opportunities. Instead, it’s best to consider taxes simultaneously with other factors – this is called strategic tax planning. And you don’t have to be a CPA to do it.
Below is a simple acronym, called SAVANT, designed to help investors and managers (who do not need to know the details of the tax code) work with their tax consultants to make better decisions, identify opportunities for tax savings, and increase the value of their businesses:
• Strategy – Look at the big picture. Don’t deter from your overall strategy just to minimize your taxes. Get your tax consultant involved in the process as soon as possible.
• Anticipation – Anticipate future changes in market conditions and tax rules.
• Value-Adding – Look at expected net cash flows, administrative costs, and risks to maximize the after-tax value.
• Negotiating – Work with other parties to the transaction to shift benefits and burdens, and negotiate with the government to increase your tax savings.
• Transforming – Convert income and expenses into categories with the most favorable tax treatment.
For an in-depth look at SAVANT and strategic tax planning, we recommend Strategic Business Tax Planning, By John E. Karayan and Charles W. Swenson – or calling your tax consultant.
Richard Welling LLP focuses on tax services for the investment management and real estate industries, and select private clients. Contact us today for a confidential review of your tax situation.