A little tax planning can avert unpleasant surprises, avoid costly penalties and prevent cash flow crises.

As with everything solo practitioners do, no one looks over your shoulder to ensure you’re handling tax obligations properly—until you botch things, and then it’s an IRS auditor.

“You have to plan,” says Judy Slack, an enrolled agent specializing in tax preparation. Otherwise, “at the end of a year you have a $10,000 tax liability and no idea how to pay it … I see people with that real shocked looked on their face, thinking, ‘I had no idea.’”

“Why add insult to injury?” agrees Fred Grant, a senior tax analyst for the Intuit® personal finance software company. “Why on top of taxes have to pay a penalty because you didn’t make your payment on time?”

Not only is planning important to meet tax obligations, but it’s also important to take advantage of opportunities. This year small-business owners can get a tax credit and a deduction if they set up a traditional retirement plan before Dec. 31.

A new law for 2002 through 2004 provides the credit when you implement a retirement plan and pay set-up costs. The credit — 50 percent of the first $1,000 spent — is in addition to the deduction for the second 50 percent expense.

“It’s almost a double dip,” Grant says.

But it’s a missed double dip, unless you plan ahead.