Three Lessons Learned from the 2020 Tax Season
It goes without saying that this year’s tax season was surprising—to say the least. Compared to last year and the years before that, 2020 forced CPA firms and clients alike to quickly adjust to the world of at-home work and keeping ourselves and our loved ones safe.
As we were transitioning, Michigan and the federal government did a service to tax preparers and citizens by moving Tax Day to July 15. But as that deadline passed and we settled in for a socially distanced summer, it gave us the chance to reflect on just how momentous the past few months really were. In the midst of all the uncertainty, one silver lining of the pandemic was that, as tax professionals, we learned strategies about how to approach tax season that we otherwise might not have come across, and how we and our clients alike might benefit from them in the future.
Below are some of the takeaways from 2020’s tax season, and although we hope it’s an experience we never have to face again, these strategies can improve the process—even in the best of times.
Planning has never been more important
After the implementation of the Tax Cuts and Jobs Act made the 2019 tax season much more challenging, it resulted in many of our clients reaching out early this time around to make sure they were prepared.
We now know that no one was prepared for what happened this year, but even though the world is a tumultuous place, businesses and clients who planned and prepared weathered the storm better. Getting in touch early is a useful strategy because it ensures that we have a full understanding of a clients’ financial situation. That knowledge allows us more time to find strategies to minimize tax liabilities, maximize cash flow, and help our people and businesses alike achieve their financial goals.
Early planning is important during a regular year. For those who may have not been in front of 2020, planning early for 2021 is an easy way to get ahead.
Filing early is still a great strategy
It is a well-known fact that most people do not enjoy working on their taxes, and no one likes to do it before they have to. In fact, many will wait to work on them until the last days. But, even though it may not be fun, filing early is important.
This lesson was reinforced by the pandemic. For individuals who filed early, most were able to receive their refunds early as well and use those funds to contribute to the inevitable personal costs of coping with COVID-19. For our business clients, those who planned tax filings into their workflow earlier in the year were able to lift the burden from their shoulders preemptively. As they began to completely uproot their personal and professional lives in late March and early April, it was one less thing they had to think about, and let them put more time into their other personal and professional obligations.
Get to know your firm
It is imperative to have a good relationship with your accountant and firm, because we can help. Yes, we crunch the numbers and get you through tax season, but much like an attorney or a public relations department, we are a resource for our clients to lean on in times of stress and uncertainty.
With so many clients competing in global marketplaces that were ravaged by COVID-19, many reached out this year for advice on strategies to navigate the pandemic in their different industries. The uncertainty spread to international tax obligations, cash flow and liquidity. For our clients, having us a phone call away put them a step ahead, because we were able to help them balance it all.
That is what we are here for, and it is why 2020 reinforced to us the importance of having a strong relationship with your tax firm. Getting through hard times is a challenge for everyone but having a strong relationship with your firm is one of the best ways to alleviate many burdens both during tax season and year-round.
To learn more about navigating all potential tax planning matters, call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.