Why Proactive Tax Planning Beats the March Scramble

Most people think about taxes twice a year: when the forms show up and when they're due. By then, the most valuable decisions have already been made for you, by the calendar.

In this episode of Tax Talk Unfiltered, Gelt's Spencer Carroll sat down with senior tax managers and team leaders Julie Susskind and Adam Bolitho to unpack a question that sounds simple but changes everything about how much you pay: what does proactive tax planning actually mean, and why does timing matter so much?

Watch the full conversation below, or read on for the highlights.

The short version: the moves that lower your tax bill happen months before you file, not in March and April. If you wait until tax season to ask your accountant for help, you're not planning. You're reporting.

Reactive vs. proactive: there's really only one kind of planning

It's easy to assume a good accountant can sit down with your documents in April and surface a pile of savings. That's not how it works. For a deeper look at this shift, see our Executive Guide to Proactive Tax Planning.

"You can't just show up on tax filing day and expect that your accountant can wave a magic wand and present you with all these opportunities," Susskind explained. The optimizations show up on the return, but they have to be set in motion long before you file. There's some low-hanging fruit most taxpayers know about. But anything meaningful (restructuring an entity, making a significant investment, building a retirement strategy) takes time.

It also tends to take money. As Susskind put it, "There's no free lunch." Most strategies require an upfront outlay of cash, whether that's an investment you're moving into or the administrative work of restructuring a company. You only reap the benefit months, or even more than a year, down the road. That requires foresight and an experienced advisor who can see how today's decisions ripple into future returns.

Bolitho framed the cost in three dimensions clients often underestimate: money, time, and risk tolerance. "Those are three things that you usually can't do on a whim on short notice."

The calendar is the constraint

Why does timing matter so much? Because most strategies can't be applied retroactively once the calendar year closes on December 31. It's a theme we keep coming back to. Waiting is expensive. See The Most Expensive Words in Tax Strategy: "Let's Do It at Year-End".

Individual taxpayers are cash-basis taxpayers, Bolitho noted. If you want the deduction, you generally have to pay for it by year-end. Miss the window on a charitable contribution or a business entity formation, and "you're essentially out of luck." By his estimate, the overwhelming majority of big-ticket items fall into that bucket.

Some moves can be made later in the year, but the further you drift from the moment a strategy should have been put in place, the more risk you take on. As Susskind explained, implementing something late can invite additional exposure, including the possibility that the IRS won't allow it to be applied retroactively. "There's nuance to a lot of different strategies, and the longer it takes to implement them, sometimes that could have its risks."

So when is the right time to sit down with your CPA? "The whole year," said Bolitho. But given where we are now, mid-year, "the time is absolutely right" for year-end items that need real lead time, like setting up a formal business entity, building out proper accounting, or establishing payroll. Our guide to year-end tax planning for business owners walks through the moves that have to happen before December 31, and the Q1 Tax Reset covers the setup work that gives you flexibility later.

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Three strategies people miss by waiting

Retirement contributions

Retirement planning is one of the most common strategies Gelt works on with clients: 401(k) contributions, including solo 401(k)s where you can contribute as both employee and employer. The catch: a client who comes in at year-end can technically still contribute, but they're now staring down a large lump sum due all at once. Plan earlier, and you can spread that cash out across quarters, months, or paychecks instead of scrambling to free up, say, $100,000 in loose cash in December.

There's a deeper trap here, too. Many people default to a SEP IRA and never hear about the advantages of a solo 401(k), where you can make the employer contribution and an employee contribution, plus after-tax and mega-backdoor Roth options. But the employee contribution can't be made after December 31. As Carroll pointed out, that's roughly $24,500 in deductions left on the table for some filers, and over $30,000 once you factor in catch-up contributions for older savers, even if the cash was available. For a fuller breakdown of solo 401(k), cash balance, and mega-backdoor Roth strategies, see how to maximize retirement contributions.

Charitable deductions

If a few extra dollars of giving would push you over the threshold to itemize, that's a real opportunity, but only if it's planned. Come in at year-end and you're again forced to outlay a chunk of cash all at once, rather than having spread it across the year. As Bolitho noted, individual taxpayers generally have to make the contribution by year-end to claim it.

Entity structure and the S-corp election

This is one Gelt sees constantly. People show up in October or November having a banner year (say, $400,000 through a sole proprietorship) and ask whether they can save on taxes. The answer is often yes, but you can't change how income was already received for 10 or 11 months of the year.

Here's the nuance most people miss, Susskind explained: an S-corp isn't its own entity. It's an election layered on a pre-existing entity. "If you don't have that pre-existing entity in place, you cannot elect an S-corp on an entity that didn't exist." The practical takeaway is almost free insurance: form an LLC, even if it sits dormant. It's cheap to maintain and gives you legal protection. Then, if you have a great year, the S election can be made retroactively. No LLC, and you're waiting another full year. Once the election is in place, there's more to get right, like setting a reasonable S-corp salary so you don't overpay payroll tax.

And the S-corp opens a chain reaction of further strategies, like making pass-through entity (PTE) tax payments alongside your quarterly estimates. Decide too late, and to capture the full credit you'd have to massively overpay the state and wait for a refund. Most people don't have tens of thousands in spare cash to park with the state, so they simply miss out. PTE is powerful but deadline-driven and state-specific. See how the pass-through entity tax can save business owners tens of thousands and how the election actually works.

"It's a chain reaction," Bolitho said. "A lot of stuff happens if you delay things too far."

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A real client win, and why timing made it possible

Susskind shared a story that captures the upside. A client came to Gelt about six months into the year with several short-term rentals. Right away, Susskind noticed the client hadn't been claiming losses she was entitled to: as an active real estate professional operating short-term rentals, she qualified for more aggressive loss-claiming opportunities than a standard long-term rental allows.

Gelt amended three years of federal and state returns and recovered upwards of $50,000 in refunds. The reason it worked? She came in early enough in the year that the team could focus on the prior returns before starting her current-year filing. "Amending three years of federal and state returns is not an easy thing to do. It took time." For another real-world example, see how a multi-location salon suite operator unlocked $45K+ in annual savings through real estate and retirement strategy.

Stories like that are why the Gelt team does this work. Both Julie and Adam came to tax somewhat by accident. Julie followed her accountant father's footsteps after taking tax courses in college. Adam pivoted from finance once he realized people pay 30-40% in taxes every year, dwarfing the half-percent differences financial advisors obsess over. Adam takes a holistic view of what he calls a client's "lifetime tax bill": current-year deductions matter, but so do retirement assets, estate planning, and what eventually passes to your children. For high-net-worth clients, that picture can swing by hundreds of thousands or even millions of dollars.

It's a mindset we've written about before: why the smartest business owners actually look forward to tax. For clients who arrive dreading the whole thing, the relief is the reward. Taxes are most people's single biggest annual bill, and the complexity can be genuinely frightening. "Having somebody calmly and confidently tell them it's going to be okay," and save them money along the way, produces a huge sigh of relief.

The first step

If any of this is striking a chord, the move is straightforward: find a trusted tax advisor who genuinely values strategy, not just return preparation. Not sure your current one does? Here are five signs your CPA has already checked out for the year. "Preparing a tax return could be quite simple, you're just putting information into a return," Susskind said. "It's really the nuance behind the numbers" that matters, and that's where the right advisor earns their keep.

And don't wait for the calendar to make your decisions for you. It's summer, everyone's busy, the kids are out of school. But good tax planning now could make next summer's vacation effectively free, because of everything you saved. Every day you wait is potential tax savings walking out the door.

Frequently Asked Questions

What is proactive tax planning?
Proactive tax planning means making tax-saving moves throughout the year, before deadlines close, rather than reacting at filing time. The strategies that actually lower your bill (entity restructuring, retirement contributions, state elections) have to be set in motion months in advance. By the time you file, the opportunities are either captured or gone.

Why can't my accountant just find savings when I file in April?
Because most strategies can't be applied retroactively once the calendar year closes on December 31. Filing is reporting what already happened. The decisions that change the number (when income lands, how your business is structured, how much you contribute to retirement) had to be made earlier.

Why should I have an LLC even if I'm not sure I'll use it?
An S-corp is an election layered on a pre-existing entity, not its own entity. If you have a banner year and want to elect S-corp treatment, you need an LLC already in place to make the election. An LLC is cheap to maintain and can sit dormant, so forming one early preserves the option. Without it, you wait another full year.

How much of a retirement deduction do I lose by waiting until year-end?
The employee portion of a solo 401(k) contribution can't be made after December 31. That can be roughly $24,500 in deductions for some filers, and over $30,000 once catch-up contributions for older savers are included, lost even if you have the cash available, simply because the window closed.

Curious whether proactive planning could lower your tax bill? Talk to a Gelt CPA.