What is Tax Planning and How Can It Help Me?
Ike Lichtenstein, CPA
During the fourth quarter of the calendar year, the last thing most people think about is taxes. This is a huge mistake because much can be accomplished by sitting down with your tax adviser early in the fourth quarter. The earlier the better, I always say! In over thirty years of preparing tax returns I have learned that if the client meets once or twice a year to do tax planning they will enjoy the following benefits:
- Any options that may reduce taxes for the current year or future years can be brought to light, examined and implemented. The results – tax savings and peace of mind.
- Greatly reduce the chances for any huge surprises coming at tax filing time! Don’t you just hate it when you are ready to file your return and you look at the amount on the REFUND line and you see nothing, but on the AMOUNT DUE line you see $$$$$$! Sometimes we plan to pay taxes on April 15th but it shouldn’t be any great surprise!
- In tax planning we don’t do things just to save taxes. Saving taxes is great but sometimes we might want to pay a bit more tax so we can have economic freedom. For example, buying and owning a house has certain tax advantages. However, owning a house is not right for everyone. Sometimes it is better to rent and when the time is right and it makes the most sense, buy the house. The tax advantages are just a part of lowering the cost of buying something. I buy the house; I am paying more per month than I if I rented but the tax savings reduce the cost of the house. In the past, the value of the house was appreciating while I was paying the mortgage so the house now becomes an investment and even a hedge against inflation. If I rent, I am free to move where and when I want and in a down market, I can never be upside down in a mortgage.
- Everybody’s situation is unique. Reading articles on taxes, following advice in tax preparation software is helpful but generic in nature. This is like reading medical instructions on the web and on a bottle of medicine instead of going to the doctor. Seeing a seasoned tax professional for planning allows you to take advantage of that person’s education and experience!
- I could list quite a few more benefits. You can call us at (239) 390-1286 for a free 40 minute telephone consultation.
- The key to limiting your tax bill is to be aware of your options and then to implement a tax savings plan by turning good ideas into action. Millions of taxes saving dollars are lost because taxpayers cannot implement good tax saving strategies by themselves
Tax avoidance is the act of limiting the amount you pay to Uncle Sam by taking advantage of every possible legal tax reduction technique you can. You probably already do this to some extent. If you put money in your 401k , IRA or medical reimbursement plan (if you own a small business), you are practicing tax avoidance because the money is excluded from your reportable income for the year.
You can probably see where I am headed with this. Sitting down with your tax adviser in October or November is one of the smartest tax planning moves you can make. Why? Well, there is still enough time left in the year that you can make major financial moves to slash your tax bill. The closer you get to December 31, the more limited you are. Given all the holidays and hoopla that occurs in the last 30 days of the year, doing the planning early just makes sense.
Give us a call today at (239) 390-1286 to arrange your free 40 minute telephone or in-person consultation.
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