When Should You Start Tax Planning?

This article is general tax education. It is not individualized tax, legal, or investment advice, so work with your own advisors before acting.

The question of when to start tax planning sounds like a scheduling question. It is actually a question about how many of the available strategies remain when the conversation begins. Sam Prentice has built his entire engagement model around this distinction, and the difference between a Q1 kickoff and a December scramble is not marginal.

When is the best time to start tax planning?

The most effective planning window is January to March, targeting the tax year that begins the following January.

Sam Prentice's hierarchy for timing, from most to least effective:

1. A 10-year plan for cash flow and taxes. Designed around long-term income projections, planned liquidity events, and entity structures that accommodate the strategy over time. This is the horizon where the biggest structural decisions compound.
2. A year ahead. Planning in Q1 for the tax year beginning the following January. Most of the strategy landscape is still open: entity structures can be built, investments can be timed, and elections can be put in place before the income is earned.
3. Reactive, year by year. Planning for a tax year already in progress, or after it has closed. Options shrink as the year advances. Planning after December 31 is tax preparation. The strategy window has closed.

The practical entry point for most clients is category 2. Q1 of the current year, planning for the year ahead, is where the full range of the three major tax reduction approaches is still available. The further into the current year, the narrower that range becomes.

Why does tax strategy need to be designed in advance?

Tax strategy shapes outcomes before income is earned; preparation and reporting capture what already happened.

Some of the most effective tax reduction structures require the activity to be established before the income event. An entity structure that changes how income is taxed needs to exist when the income flows. A qualified investment that creates a loss needs to be placed in service during the year the deduction is claimed. A contribution to a charitable structure needs to be funded before the appreciated asset is sold.

When planning begins after December 31, none of those options remain. The strategist is working with fixed facts: specific income, specific expenses, specific assets. The conversation shifts from "how can we design the outcome" to "how do we report what happened." Both are useful, but they are not the same service, and they do not produce the same result.

Sam Prentice's framing for this: tax strategy belongs before the fact pattern is set. Clarity on what the money is for comes first, then the strategy is built around that clarity, then the plan is implemented. Doing them out of order means designing a plan around the wrong goal or missing the window to act on it.

What can still be done if planning starts in the fourth quarter?

Q4 planning still captures a significant share of available options, though some structures needed to be in place earlier in the year.

Based on his experience with client engagements, Sam Prentice estimates that starting in September to December still captures roughly 80 percent of the available tax strategy value for that year. That figure reflects the reality that many of the highest-impact moves, including year-end purchases for bonus depreciation elections, charitable contributions, and adjustments to income timing, are still available in Q4.

What Q4 typically forecloses:

• Entity structure changes that needed to be operational for most of the year to capture the intended benefit
• Passive activity elections, like real estate professional status, that require material participation across the full year, as the Journal of Accountancy explains in its coverage of passive loss thresholds
• Qualified investments that needed to be capitalized earlier to generate the year's depreciation

What Q4 still allows:

• Charitable contributions, which the IRS requires to be paid before the close of the tax year to qualify for that year's deduction, per the IRS guidance on charitable contribution deductions
• Qualifying purchases of business equipment placed in service before December 31, for available depreciation elections
• Year-end income timing adjustments between entities where that flexibility exists

The guide to the 3 ways to reduce a tax bill covers each approach and which ones require advance setup versus which can be implemented late in the year.

What is the difference between a 10-year plan and year-by-year management?

A 10-year plan shapes how income, assets, and entity structures are built from the beginning; annual planning adjusts within what already exists.

Year-by-year planning works within the existing structure. The entities are already formed, the investments are already in place, and the planning conversation is about optimizing within those constraints. The available moves are meaningful, but the ceiling is set by decisions made in earlier years.

A 10-year plan changes the ceiling. It starts from what the client wants the financial picture to look like in a decade, then works backward through the entity structures, income sources, and investment types that make that possible. Tax strategy becomes a design parameter from the beginning. It shapes the fact pattern across years.

Sam Prentice's approach combines both: a long-horizon framework that shapes the major structural decisions, and an annual planning cycle that keeps the implementation on track. The long-horizon work is where the largest tax reduction typically happens, because it shapes the fact pattern before income is earned across a decade of decisions.

How do quarterly estimated tax deadlines connect to planning?

Most high earners with business or investment income must pay quarterly estimated taxes, and those deadlines make late planning immediately costly.

According to the IRS estimated taxes page, individuals who expect to owe $1,000 or more in taxes after withholding generally must make quarterly estimated payments. IRS Publication 505 states the underlying requirement: taxpayers must pay tax as they earn or receive income throughout the year, either through withholding or estimated payments.

Under Section 6654 of the Internal Revenue Code, a penalty is added to the tax when estimated payments fall short of the required amount. The four installment deadlines fall in April, June, September, and January, with the required installment set at 25 percent of the required annual payment.

The connection to planning timing: a strategy put in place early in the year reduces the income that estimated payments are calculated against. A strategy assembled in December cannot retroactively reduce the Q1 through Q3 payments already made. Late planning can recover some of the year's value, but it cannot change the payments already sent.

How does Sam Prentice's engagement model fit around tax timing?

Sam Prentice builds year-long plans designed to begin in Q1, capturing the full planning window for the year ahead.

The engagement starts by getting clear on what the client wants from the money. That clarity exercise comes before the strategy is designed, because the strategy is built to serve the outcome. From there, a full financial audit maps the current fact pattern, a wealth roadmap is designed around the client's goals, and implementation is coordinated with the client's own CPA, attorney, and financial team.

The timing matters for the engagement itself: clients who begin in Q1 have access to the full range of entity, loss, and incentive-purchase approaches for that year. Clients who begin in Q3 or Q4 can still capture most of the value, but the engagement starts with a narrower set of options.

The Private Client Engagement is $30,000 per year, with month-to-month contracts and no long-term lock-in. It is available to founders and high earners with $300,000 or more in annual income or $1 million or more in net worth. To discuss timing and fit, book a discovery call.

Frequently asked questions

Is there a deadline for setting up an annual tax strategy?

There is no single government-imposed deadline for starting a tax strategy, but effectiveness decreases the later planning begins. Some approaches, including entity structure changes and qualified investment elections, require the activity to be in place before the relevant income is earned. Planning that starts in Q4 can still capture most of the available value. Planning that starts after the year closes can only report what happened.

What happens if quarterly estimated taxes are not paid on time?

Under Section 6654 of the Internal Revenue Code, a penalty is added to the tax when an individual underpays estimated taxes during the year. The required installment is generally 25 percent of the required annual payment, due in April, June, September, and January. The penalty does not apply if the total tax liability is less than $1,000 or if the prior year's tax liability was fully covered.

Can tax planning still help once a year has already closed?

Planning done after December 31 is tax preparation. The income and expenses are already set. A strategist working on a prior year can identify reporting improvements but cannot restructure what happened. Sam Prentice's approach focuses on the year ahead, where structural changes and investment decisions still shape the outcome.

What should a high earner do in January versus December for taxes?

January is when year-ahead strategy begins: reviewing income projections, confirming entity structures, and designing the plan for the year that just started. December is when the Q4 window closes: charitable contributions must be completed before December 31 per IRS guidance, and qualifying purchases for available depreciation elections need to be placed in service by year-end. January decisions compound across the year; December decisions recover what was not set up earlier.

Does Sam Prentice help with tax preparation, or with tax strategy design?

Sam Prentice designs tax strategy and coordinates its implementation with the client's own CPA, attorney, and financial team. He does not prepare or file returns. Tax preparation reports what happened during a closed year; tax strategy designs what will happen in an open one. Sam Prentice works on the strategy side, with the client's own professionals handling the preparation.

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Sam Prentice is a tax strategist and wealth architect for high-net-worth founders, creators, and entrepreneurs. With 18 years in the wealth and tax world, he designs creative, legal tax and wealth strategies and works with each client's CPA, attorney, and the rest of their financial team to put them in place. Connect with him on LinkedIn or follow him on Instagram.