Ever heard of Vern Law? No, it’s not a facet of some state or federal legal code, financial rule of thumb, nor some scientific observation of the way the universe works. In fact, it’s not a law at all. Vernon Sanders Law, was a pitcher for the Pittsburgh Pirates from 1950-1967. He is probably most noted for winning the Cy Young Award in 1960, which also happened to be a year the Pirates won the World Series.
If you know me, you probably also know that just about anything to do with baseball interests me. When I can find an excuse to include America’s pastime in my daily routine, or the Accountable Update, I will do so. Case in point, for many years I have coached youth baseball and softball. People often thank me for volunteering or sacrificing my time for the sake of their kids. What they may not realize is that this activity has offered a welcome respite during what is frequently one of the most hectic times of the year in financial services, also known as tax season. I often feel like it is me that should be thanking them for having kids that play the game!
So, what does this have to do with Vern Law? It’s something he is credited with saying, “Experience is a hard teacher because she gives the test first, the lesson afterwards.”
About a year ago, ATX Portfolio Advisors opened for business. As a first time business owner, I have learned several lessons during the latest lap around the sun. The ones that were tested most often weren’t what I knew or didn’t know. The most frequent were those that exposed what I didn’t know that I didn’t know!
With tax (and baseball) season in full swing, I recently had the opportunity to chat with Chris Thomas, an Austin partner and CPA at the accounting firm, Tidwell Group. We discussed what lessons that he most frequently found himself teaching, after the test, to their clients. Chris and his colleague, Ryan Nevill, shared the following wisdom.
What is the most common mistake you see business owners make when it comes to minimizing taxes?
“The most common mistake business owners make when it comes to minimizing taxes is not planning ahead. The business owner's tax preparer should be consulted throughout the year in order to prepare for tax filing. A tax professional can often find ways to minimize taxes, including taking advantage of credits the owner may have not been aware of.”
What other mistakes do you commonly see?
“Other common mistakes include not being aware of new tax laws, not communicating transactions accurately and timely, and not being flexible with structuring or seeking out tax professionals that are experts in specific areas.”
What are a small business owners best practices for keeping their taxes down?
“The best way for a business owner to keep their taxes down is to be proactive. Take the time to learn the general tax laws relevant to your industry, and become familiar with the guidelines presented in your organizational documents. Identify extraordinary business events before they happen and know when to consult your tax preparer. Being proactive instead of reactive is the best way to keep taxes down.”
Maybe not surprisingly, all of these responses have very direct applications to overall financial planning as well. Lacking a plan, not seeking expert guidance, and not staying current with ever changing rules and laws are probably the most common mistakes I encounter.
The main reasons for these mistakes, in my opinion, are lack of time and interest in dealing with what can sometimes be detailed and mundane topics. As another baseball great famous for quotes, Yogi Berra, once said, “In baseball, you don’t know nothing.” If you start with that realization about everything else, you will be well on your way to passing the next test.
If your financial plan isn’t making a passing grade, let’s play ball.