The $50,000 Tax Mistake Most Business Owners Make Without Realizing It

The conversation around tax planning has evolved significantly from the compliance-focused mentality that dominated business thinking for decades. Where tax departments once functioned primarily as administrative units focused on accurate filing, they have emerged as strategic functions with direct impact on enterprise valuation, competitive positioning, and long-term wealth preservation. This shift reflects a fundamental recognition that tax liability represents one of the largest controllable expenses in any business operation, and that thoughtful optimization delivers results equivalent to meaningful revenue growth.

The numbers tell a compelling story. Consider two businesses generating identical revenue with identical operating expenses—the one implementing sophisticated tax optimization strategies can retain substantially more capital for reinvestment, dividend distribution, or balance sheet strengthening. Over extended time horizons, these differences compound dramatically. A one percent annual tax advantage sustained over twenty years produces wealth accumulation effects that dwarf most operational improvements requiring substantially greater investment and effort.

This perspective matters because the alternative—paying more tax than legally required—represents a failure of fiduciary responsibility. Business leaders who accept suboptimal tax positions as inevitable overlook the fact that tax code complexity creates deliberate opportunities for reduction. Congress and legislative bodies build deductions, credits, and timing mechanisms into tax law precisely because they want to incentivize specific behaviors: capital investment, research activity, employment in designated zones, and countless other policy objectives. Capturing these benefits requires active planning rather than passive compliance.

The competitive dynamics reinforce this reality. In industries with thin margins, tax optimization can mean the difference between profitability and loss. Competitors who capture available deductions operate with structurally lower cost bases, enabling pricing flexibility or margin expansion that competitors cannot match. This creates pressure for all market participants to engage seriously with optimization strategies or accept relative disadvantage.

Understanding the Legal Framework: Tax Avoidance vs. Tax Evasion

The distinction between tax avoidance and tax evasion constitutes the foundational framework governing all optimization strategies. These terms are frequently conflated in public discourse, but the legal boundary between them is well-established and carries profound implications for implementation approach. Understanding this boundary is not academic—it determines which strategies can be pursued confidently and which require careful evaluation of potential exposure.

Tax avoidance refers to legal arrangements that reduce tax liability through explicit provisions of the tax code. These arrangements are characterized by disclosure to tax authorities, economic substance that justifies the tax treatment, and intent that aligns with legislative purpose. The taxpayer using a legitimate depreciation schedule to reduce taxable income is engaging in avoidance. The business claiming research credits for qualifying activities is engaging in avoidance. These strategies are not merely legal—they are contemplated and encouraged by the tax framework itself.

Tax evasion, by contrast, involves intentional misrepresentation, concealment, or fraud designed to understate actual tax liability. The key elements are lack of disclosure, absence of economic substance, and intent to deceive. Underreporting income, inflating deductions without basis, and hiding assets in unreported offshore accounts all constitute evasion. These behaviors carry criminal penalties and represent clear red lines that no optimization strategy should approach.

The space between these categories contains what practitioners call gray areas—positions that lack clear authority but may be defensible under aggressive interpretation of applicable rules. Navigating this space requires explicit acknowledgment of the uncertainty involved and assessment of willingness to defend positions if challenged. Some businesses embrace aggressive positions with full awareness that they may require litigation to sustain. Others prefer conservative approaches with lower audit risk. Both strategies represent legitimate business choices when implemented with full awareness of the tradeoffs involved.

Business Entity Structure and Tax Efficiency Optimization

Entity selection represents the most consequential tax decision for any new business, yet it receives remarkably little strategic attention at formation. The choice between sole proprietorship, partnership, S corporation, C corporation, and limited liability company structures creates the fiscal infrastructure that governs all subsequent tax consequences. Errors at this stage produce permanent inefficiencies that cannot be fully corrected without costly restructuring.

The fundamental variable is the treatment of business income at the owner level. Sole proprietors report business income on personal tax returns, creating pass-through taxation where business profits face individual rates regardless of earnings retained in the operation. Partnerships and S corporations replicate this pass-through treatment but with different administrative requirements and allocation mechanisms. C corporations face corporate-level taxation on profits, with dividend distributions then subject to individual taxation—creating the double taxation that concerns many business owners.

The tradeoffs are not purely mathematical. Pass-through entities avoid double taxation but may face limitations on certain deductions and face self-employment tax obligations on net earnings. C corporations absorb corporate-level tax but enable retention of earnings at potentially lower effective rates and provide more flexible compensation structures. The optimal choice depends on profit levels, growth expectations, outside investment requirements, and owner preferences regarding risk tolerance and administrative complexity.

Limited liability companies occupy a middle ground, offering pass-through taxation by default while permitting election of corporate treatment if advantageous. This flexibility makes LLC structures popular for new ventures where optimal entity type remains uncertain. The ability to change tax treatment without changing business structure reduces the risk of premature commitment to an inappropriate framework.

S-Corp vs. C-Corp Taxation: When Double Taxation Becomes a Feature, Not a Bug

The C Corporation versus S Corporation decision generates more confusion than almost any other entity selection question, largely because the surface-level comparison emphasizes the wrong factors. Advocates of S Corp status frequently highlight the avoidance of double taxation, as if corporate-level taxation were inherently undesirable. In reality, the C Corp framework offers advantages that sophisticated business owners actively prefer under specific circumstances.

The mathematical comparison reveals the underlying logic. A C corporation earning $500,000 in taxable income faces corporate tax at 21 percent, leaving approximately $395,000 for distribution as dividends. The shareholder then includes those dividends in personal income, facing rates that vary based on total income and filing status. An S corporation earning the same amount passes the entire $500,000 through to shareholders, who pay individual rates on their share of earnings.

The apparent advantage of S Corp treatment evaporates when considering retained earnings. C Corp shareholders who do not receive dividends avoid personal taxation on corporate profits, creating a deferral mechanism that can significantly reduce lifetime tax burden on accumulated earnings. Businesses intending to reinvest profits for extended periods—growth companies, acquisition platforms, and capital-intensive operations—may find C Corp treatment more favorable despite (or rather, because of) the corporate-level tax.

Consider a business generating $500,000 in annual profit with owner intent to retain earnings for five years before distribution. Under C Corp treatment, the corporation pays $105,000 in corporate tax, retaining $395,000 each year for total retained earnings of approximately $1,975,000. Upon liquidation or dividend distribution, shareholders pay personal tax on extracted amounts. Under S Corp treatment, the full $500,000 flows through annually, accumulating in shareholder hands where investment returns on those funds face current taxation. The C Corp structure enables tax-deferred compound growth within the corporate entity.

The decision ultimately depends on factors beyond headline tax rates. C Corp treatment becomes advantageous when retained earnings exceed distribution requirements, when outside equity investment necessitates corporate structure, when specific deductions (like the domestic production activities deduction) provide offsetting benefits, or when future sale or public offering is contemplated. S Corp treatment favors businesses with consistent distribution requirements, owner preferences for current income recognition, and situations where the pass-through framework provides clear mathematical advantage.

Strategic Deduction and Credit Maximization Approaches

Deduction optimization requires understanding the hierarchy of tax law and how different categories of reductions interact. The naive approach—identifying every potentially applicable deduction and claiming all available amounts—often produces suboptimal results. Strategic deduction planning considers timing, interaction effects, and the alternative minimum tax implications that can eliminate otherwise valuable benefits.

The tax code organizes deductions into distinct categories with different rules and limitations. Above-the-line deductions reduce adjusted gross income and are valuable precisely because they remain available regardless of whether the taxpayer itemizes. Business expenses reported on Schedule C, traditional IRA contributions, and alimony payments all qualify as above-the-line reductions. Below-the-line deductions apply only to taxpayers itemizing and reduce taxable income after the adjusted gross income calculation. Understanding this distinction matters because deductions valuable for one taxpayer may provide no benefit for another.

Credits operate differently from deductions, providing dollar-for-dollar reduction in tax liability rather than percentage-based reduction in taxable income. This distinction explains why even modest credits can exceed the value of substantial deductions for taxpayers in lower brackets. The research and development credit, the child tax credit, the energy efficiency credit, and dozens of other provisions create tax savings that pure deduction strategies cannot match. Identifying available credits and structuring activities to qualify requires proactive planning rather than year-end review.

The timing dimension adds additional complexity. Accelerating deductions into the current year provides immediate benefit but may be unavailable in future years. Deferring deductions to future years creates current year tax exposure but establishes sustained reduction capability. The optimal approach depends on current versus expected future tax rates, cash flow considerations, and the permanence or temporariness of specific deduction provisions. The Tax Cuts and Jobs Act’s suspension of miscellaneous itemized deductions exemplifies why timing matters—deductions available one year may disappear the next.

Documentation substantiates deductions and credits claimed. Maintaining contemporaneous records establishes the factual basis for claimed reductions and provides defense against audit challenges. The business owner’s mileage log, receipt preservation, and contemporaneous memoranda of business purpose transform potentially contested positions into defensible claims. This documentation infrastructure enables confident implementation of aggressive-but-legal strategies.

Section 179 Depreciation and Bonus Depreciation: Front-Loading Capital Expenditures

Section 179 depreciation and bonus depreciation provisions represent the most powerful acceleration mechanisms available for reducing current-year tax liability through capital expenditure timing. These provisions enable businesses to convert capital purchases into immediate deductions rather than spreading depreciation across the asset’s useful life. Understanding the mechanics and coordination requirements enables strategic deployment of these powerful tools.

Section 179 allows businesses to deduct the full cost of qualifying property in the year placed in service, up to annual limits that change with inflation adjustments. The legislation establishes both a dollar limit (currently over $1 million) and a business income limit preventing deductions from generating business losses. Qualifying property includes most tangible personal property—equipment, furniture, vehicles, and computer systems—used in business operations. Real property improvements may qualify under specific circumstances, though the rules are more restrictive than for personal property.

Bonus depreciation operates alongside Section 179 with different rules and limits. Bonus depreciation allows immediate deduction of a percentage of qualified asset cost, with the percentage phasing down over scheduled years. Unlike Section 179, bonus depreciation has no business income limitation, making it particularly valuable for businesses generating losses or with limited other taxable income. The provision does, however, require the asset to be new rather than used—a distinction that can affect purchasing decisions.

The coordination between these provisions requires careful planning. A business acquiring $500,000 of qualifying equipment would first apply Section 179 to the extent of available limits, then apply bonus depreciation to any remaining basis. The combined effect can potentially allow full immediate deduction of substantial capital expenditures, dramatically reducing current-year tax liability while preserving cash for operational purposes.

The strategic implications extend beyond the current tax year. Assets claimed under Section 179 or bonus depreciation face recapture provisions if disposed of before the end of their useful lives—the deductions claimed must be recaptured as ordinary income to the extent of gain realized on disposition. This creates coordination requirements with long-term asset disposition planning. The business acquiring equipment today must consider potential scenarios for that equipment’s future, including whether premature disposition might trigger unexpected tax liabilities.

Income and Expense Timing Mechanisms for Tax Deferral

The timing of income and expense recognition represents one of the most powerful levers for legitimate tax liability manipulation. By accelerating deductions into the current tax year and deferring income to future years, businesses can achieve significant present-value savings from tax deferral. The tax code provides substantial flexibility in many timing decisions, and capturing this flexibility requires systematic planning rather than passive acceptance of default treatment.

Cash basis taxpayers generally have discretion over when to receive income and when to pay expenses, within constraints requiring economic substance for the timing chosen. The decision to delay customer invoicing until January rather than December defers income recognition to the following tax year. The decision to accelerate vendor payments into December rather than waiting until January accelerates deduction recognition. These choices can shift meaningful amounts of tax liability between years, with the present-value benefit increasing as tax rates rise.

Accrual basis taxpayers face more structured timing rules but retain significant flexibility through year-end closing procedures. The economic performance standards governing accrual deductions generally require that services be performed or goods delivered before deduction is available. However, prepayments for services extending beyond one year may be deducted currently under the 12-month rule, creating acceleration opportunities for items like insurance premiums, rent, and maintenance contracts covering future periods.

The strategic deployment of timing mechanisms requires attention to future tax rate expectations. Accelerating deductions makes sense when current rates exceed expected future rates. Deferring income makes sense when current rates exceed expected future rates. The calculation becomes more complex when rates are expected to remain stable or when loss carryforward limitations affect the utilization of accelerated deductions. Businesses expecting substantially higher profits in future years may prefer current-year income recognition to utilize deductions at lower rates while paying tax at higher future rates.

The mechanics of implementation matter significantly. Documentation establishing the business purpose for timing decisions protects against IRS challenges that timing choices lack economic substance. Contemporaneous records demonstrating that invoices were prepared in December but not mailed until January, or that vendor negotiations included payment timing considerations, transform aggressive positions into defensible claims. This documentation investment enables confident deployment of timing strategies.

Year-End Tax Planning Tactics: The Final Quarter Window

The final quarter of the fiscal year concentrates more planning opportunities than the preceding nine months combined. December decisions carry disproportionate impact on annual tax liability, creating a narrow window for actions that would be ineffective or unavailable at other times. Understanding this concentration enables prioritization of planning efforts and avoidance of missed opportunities.

Equipment purchases represent the highest-impact year-end opportunity for many businesses. The decision to acquire needed equipment in December rather than January can mean the difference between full immediate deduction and multi-year depreciation schedules. The analysis extends beyond pure tax consideration—equipment acquisition decisions should rest on operational justification—but when acquisition is contemplated, timing for tax optimization deserves explicit attention.

Retirement plan contributions offer deduction acceleration that also benefits owners and employees. Solo 401(k) contributions for owner-only businesses allow substantial pre-tax savings, with the contribution deadline extending beyond year-end for some plan types. SEP-IRA contributions remain available until the tax filing deadline, providing extended planning flexibility. These contributions reduce current-year income while building retirement assets, representing one of few win-win planning opportunities.

Compensation timing requires coordination between employer and employee interests. Discretionary bonuses declared in December and paid within the applicable period (generally 2.5 months for accrual basis employers) are deductible in the declaration year. This enables acceleration of compensation deductions while employees include income in the year received. The planning requires agreement on bonus amounts before year-end closes and appropriate documentation of the discretionary nature of the awards.

Cross-Border and Jurisdictional Tax Planning Considerations

Operations spanning multiple jurisdictions introduce compounding complexity that requires integrated planning across regulatory frameworks. The interaction between tax systems—often designed with minimal coordination—creates both optimization opportunities and compliance risks. Businesses expanding across borders must understand these dynamics before establishing presence in new jurisdictions.

The fundamental issue is that no unified international tax framework exists. Each country maintains sovereign authority over taxation within its borders, creating overlapping claims on income generated by multinational operations. The United States taxes citizens and residents on worldwide income regardless of source. Other countries typically tax income generated within their borders. The interaction creates potential for double taxation, mitigated by foreign tax credits and treaty provisions that vary by jurisdiction.

Entity location decisions drive international tax consequences. Establishing operations through foreign subsidiaries enables foreign income to accumulate offshore, potentially deferring US taxation until repatriated. The timing of repatriation, and the structure of repatriation mechanisms, creates planning opportunities for businesses with substantial foreign earnings. The Tax Cuts and Jobs Act imposed a transition tax on accumulated foreign earnings, demonstrating that legislative changes can eliminate previously available deferral benefits.

Permanent establishment thresholds determine when foreign operations trigger local country taxation. Most tax treaties and domestic rules establish thresholds—based on physical presence, employee activities, or contract authority—below which foreign entities can operate without creating taxable presence. Understanding these thresholds enables optimization of sales and support activities without triggering unexpected local tax obligations. The rules are facts-and-circumstances determinations that require careful analysis of actual activities rather than mechanical application of bright-line tests.

The compliance burden of multi-jurisdictional operations scales with complexity. Filing requirements multiply with each jurisdiction where operations occur, and the penalties for non-compliance can be severe. FBAR requirements for foreign financial accounts, Form 5471 disclosures for foreign corporate ownership, and countless other reporting obligations create compliance infrastructure requirements. Businesses must weigh optimization benefits against administrative costs before expanding jurisdictional footprint.

Transfer Pricing Regulations: Managing Intercompany Transactions

Transfer pricing—the pricing of goods, services, and intellectual property between related entities—represents the primary compliance and optimization lever for multinational operations. Jurisdictions worldwide require intercompany transactions to be conducted at arm’s length prices, meaning prices equivalent to those charged between unrelated parties in comparable circumstances. This standard creates both compliance obligations and planning opportunities.

The arm’s length standard is easier to state than to apply. Related parties can structure transactions in ways that unrelated parties never would, and the comparability analysis required to establish arm’s length prices involves substantial judgment. Documentation supporting transfer pricing positions must demonstrate that pricing falls within reasonable range of comparable uncontrolled transactions, with adjustments for functional differences between tested parties and comparables.

Transfer pricing methods include the comparable uncontrolled price method, the resale price method, the cost plus method, the profit split method, and the transactional net margin method. The appropriate method depends on the nature of the transaction, the availability of comparables, and the functional profile of the entities involved. Most jurisdictions permit any method that provides reliable arm’s length results, creating flexibility in approach selection.

Transfer pricing documentation serves dual purposes: satisfying regulatory requirements and establishing defensible positions. Contemporaneous documentation prepared at the time of transactions demonstrates that pricing decisions reflected arm’s length analysis rather than post-hoc rationalization. Master file, local file, and country-specific documentation requirements have expanded globally, creating substantial compliance infrastructure needs for multinational enterprises.

Compliance Requirements and Documentation Standards

Robust compliance infrastructure is not the enemy of aggressive tax planning—it is the enabler that permits confident implementation of optimization strategies. The businesses that achieve the most favorable tax positions typically maintain the strongest documentation and compliance frameworks, not because they fear audit, but because thorough preparation enables positions that less prepared entities cannot safely pursue.

The compliance foundation begins with clear policies and procedures governing tax position identification, evaluation, and implementation. Business activities with tax consequences should flow through processes that identify planning opportunities and compliance requirements before transactions occur. Reactive approaches—discovering optimization opportunities after transactions complete—miss timing benefits and may create documentation gaps that compromise defensibility.

Internal controls over tax accounting ensure that financial statements reflect appropriate tax provisions and that book-tax differences are tracked systematically. The income statement tax provision, deferred tax asset and liability calculations, and effective tax rate analysis all require specialized expertise and systematic processes. Material weaknesses in tax internal controls create audit risk beyond the underlying merits of specific tax positions.

The relationship with tax advisors deserves strategic attention. The most sophisticated businesses maintain ongoing relationships with specialized tax counsel who understand their operations and can provide integrated advice across planning, compliance, and controversy matters. Transaction-specific engagements with unfamiliar advisors may miss planning opportunities and require extensive education before productive engagement can begin. The investment in relationship development pays dividends in efficiency and strategic alignment.

Continuous monitoring of regulatory developments ensures that planning strategies remain valid as rules evolve. Tax law changes at federal, state, and local levels, with amendments, new provisions, and judicial interpretations constantly shifting the landscape. Businesses with effective monitoring processes adapt planning strategies proactively, while those dependent on periodic advisor communications may discover that their approaches have become outdated or problematic.

Audit Defense Documentation Requirements: Building Your Evidence Trail

Audit defense begins with documentation created contemporaneously—not in response to audit notification. The distinction between contemporaneous documentation and post-hoc rationalization is fundamental to how tax authorities evaluate contested positions. IRS examiners and state auditors are trained to identify documentation created for audit defense rather than as a normal business practice, and such documentation receives correspondingly reduced weight.

Contemporaneous documentation has specific characteristics that establish its credibility. It is created at or near the time of the underlying transaction, by individuals with direct knowledge of the relevant facts, and maintained in the regular course of business rather than in dedicated tax files. Meeting minutes documenting business rationale for significant transactions, emails reflecting decision-making processes, and memoranda supporting pricing decisions all qualify as contemporaneous evidence.

The documentation framework should address each material tax position with specific evidentiary elements. For business expense deductions, this includes documentation establishing business purpose, amount paid, and timing of payment. For intercompany transactions, this includes functional analysis, comparability studies, and economic rationale for pricing decisions. For entity classifications, this includes capital structure documentation and all relevant facts affecting the determination.

Preservation of documentation requires systematic processes. Electronic storage should include appropriate retention periods, backup procedures, and accessibility provisions. The business should identify key document categories, establish retention schedules consistent with applicable statute of limitations periods, and implement processes ensuring that relevant documents are not inadvertently destroyed during routine record management. The cost of document preservation infrastructure is modest compared to the cost of defending tax positions without supporting evidence.

The response strategy when audit notification arrives should be predetermined rather than improvised. The team responsible for audit coordination, the process for engaging specialized counsel, and the communication protocols with examining agents should all be established before the need arises. Prompt professional response to audit notifications demonstrates organizational seriousness and begins the process of establishing defensible positions.

Conclusion: Implementing Your Tax Optimization Framework

Effective tax optimization operates as a systematic discipline rather than a collection of independent tactics. The strategies discussed throughout this guide interact with each other—entity selection affects deduction availability, timing decisions interact with planning for estimated payments, and cross-border considerations affect domestic entity structure choices. Achieving optimal results requires integrated thinking that coordinates these elements into a coherent framework.

The implementation sequence matters. Entity structure decisions at formation create the foundation for all subsequent planning. Timing strategies build on entity structure to optimize annual tax flows. Deduction and credit maximization adds incremental benefits within the established framework. International considerations require separate analysis but must be coordinated with domestic planning to avoid conflicting approaches. Compliance infrastructure provides the foundation that permits confident implementation.

The framework requires ongoing adaptation as circumstances and regulations change. Business evolution—new products, geographic expansion, ownership changes—creates new optimization opportunities and may invalidate previous approaches. Regulatory evolution—new legislation, judicial interpretations, administrative guidance—constantly reshapes the planning landscape. The businesses that sustain optimal positions over time treat tax planning as a continuous function rather than an annual exercise.

Professional expertise amplifies internal capabilities. The complexity of modern tax law exceeds what general business judgment can navigate without specialized support. Relationships with qualified tax advisors—whether through ongoing engagement with full-service firms or project-specific consultations with specialists—provide access to expertise that transforms optimization possibilities into implemented strategies. The investment in professional support typically generates returns multiples of its cost.

The ultimate objective is not tax minimization in isolation, but tax optimization in coordination with business objectives. The optimal tax position for a business planning rapid growth and eventual sale differs from the optimal position for a business focused on current income distribution. Understanding business goals enables tax strategies that support those goals rather than distorting business decisions toward tax-preferred structures. This alignment—tax planning that serves business objectives rather than substituting for them—represents the mature approach that sophisticated enterprises employ.

FAQ: Common Questions About Legal Tax Reduction and Optimization Strategies

How much can legal tax planning realistically reduce my tax liability?

The potential reduction varies dramatically based on current tax position, business characteristics, and planning aggressiveness. Businesses with substantial capital expenditures can reduce taxable income significantly through depreciation acceleration. Service businesses may find smaller but meaningful reductions through retirement plan contributions, expense timing, and entity structure optimization. Realistic expectations range from 10 to 40 percent reduction in tax liability for businesses engaging seriously with comprehensive planning strategies.

When should I involve a tax professional in planning decisions?

Tax professional involvement should occur before transactions complete, not after. The structure of a business acquisition, the terms of a related-party transaction, or the location of new operations all affect tax consequences in ways that may be difficult or impossible to modify after implementation. Early engagement enables tax considerations to inform transaction structure rather than merely documenting decisions already made.

Are state and local taxes worth considering separately from federal planning?

State and local tax obligations often exceed federal estimates, particularly in high-tax jurisdictions. The compound effect of state income taxes, franchise taxes, property taxes, and sales taxes creates cumulative burdens that can approach or exceed federal liability. Effective planning must address the full jurisdictional landscape, not merely federal obligations.

How do I evaluate whether a tax position is aggressive but legal versus potentially problematic?

The evaluation criteria include clarity of authority supporting the position, consistency with legislative intent, disclosure implications, and willingness to defend if challenged. Positions with clear regulatory or judicial support, that align with the purposes of applicable provisions, and that the taxpayer is prepared to sustain through examination represent aggressive-but-legal territory. Positions lacking clear authority, that appear to exploit technical distinctions contrary to legislative purpose, and that the taxpayer would abandon under audit pressure approach problematic territory.

What documentation should I maintain for routine business expenses?

Routine expense documentation should include the business purpose established contemporaneously, the amount paid, the payee, the date of payment, and the business relationship establishing the expense as ordinary and necessary. Receipts, credit card statements, and business calendars or trip reports all contribute to comprehensive documentation. The standard is not perfection but reasonable substantiation that establishes the factual predicate for claimed deductions.

How often should I review and update my tax planning strategies?

Annual review before year-end planning begins ensures that current strategies remain optimal given any changes in circumstances or regulations. Significant business changes—new ventures, acquisitions, ownership transitions—trigger immediate strategic review. Regulatory developments throughout the year may require mid-year adjustments to planned approaches. The default should be more frequent review rather than less, with the cost of review typically far below the cost of suboptimal planning.