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Never Let The Tax Tail Wag The Economic Dog

Most entrepreneurs know that tax planning is important because taxes are often very big expenses and take priority demands on cash flow. However, most entrepreneurs also leave tax planning to the experts, who usually get involved too late in the process to be effective without being disruptive. But it is these owners who are in the best position to identify tax opportunities and costs early on, and weigh tax savings against non-tax considerations (which typically and appropriately dominate most business decisions). Strategic Tax Planning is an approach which enables entrepreneurs to take an organized approach to substantive tax issues and thus be more effective in enhancing their bottom line. Unfortunately, many entrepreneurs will only think about taxes when time has run out to actually do something about them. After an IRS audit notice, for example, all that can be done is to pull together the documents they want to see, and pray they do not find anything. If they do find something, there is an uphill battle to persuade the IRS that it is wrong. After a new project, or whole new venture, is planned, changing structures to save taxes can be very difficult.

This behavior is quite natural, because in this age of globalization and change, companies face a bewildering array of uncertain and ever changing tax rules. People not trained in taxation can never really understand all there is to know about it, and thus rely on experts for detailed knowledge.

However, the least costly and most effective tax planning is done while a business idea is being developed. Because most entrepreneurs do not have an organized knowledge of generic tax strategies which apply to specific business processes, the tax aspects of most projects are not considered until the proposals have become advanced. At that stage, tax planning is usually more expensive, less effective, and causes friction between the business owner and outside professionals. The latter situation occurs because, all too often, people with tax expertise are thrust in the role of "deal breakers" at the end of the decision process rather than deal makers guiding it from the beginning.

The way to get entrepreneurs to be able and willing to think about the big issues in taxes, in an organized fashion, is through strategic tax planning. It enhances the quality of tax planning being done and also allows business people to better use (i.e., not waste time and money on) tax specialists because the major tax issues and cost-benefit trade-offs involved in structuring a deal are already identified.

Put simply, strategic tax planning’s “strategic” (rather than detailed) orientation helps business decision makers use their company and industrial knowledge to better balance the costs and benefits of tax planning ideas. Furthermore, it is organized around business processes to further help entrepreneurs identify tax planning techniques, as well as their tax and non-tax costs and benefits, and thus better plan business and personal projects and activities.

ITA’s mission is to provide sufficient information to help business decision makers identify (and balance the costs and benefits of) tax savings ideas early on and throughout development of a strategy, thus making its implementation less intrusive and more effective.

ITA’s strategic tax planning process is organized around business processes, such as the important tax aspects of the ways businesses penetrate new markets. Quite often, existing professional tax services focus either on preparing individual tax returns or on explaining tax rules which affect particular types of transactions (such as buying and selling stocks). These organizations simply tend to concentrate around tax forms (e.g., itemized deductions and Internal Revenue Code Sections) or on the specifics of completing the paperwork for procedures like an IRC Section 1031 "Like Kind" Exchange. These services tend to be too narrow in their scope and too technical for most entrepreneurs’ needs.

Business owners need to focus on one goal: making decisions that will allow their business to succeed. Successful entrepreneurs, like all effective leaders, recognize the need for specialized people to handle the details that make their companies run to their best capacity. Savvy entrepreneurs, therefore, need specialized tax strategists, like ITA, who not only can spot the right tax planning opportunities to suit the company’s needs but also can take care of the details to make it happen, leaving the owners to do what they do best…run their companies.