- May 29, 2020
- Posted by: Smith & Smith
- Category: Blog
What is tax planning?
Tax planning is the method of using successful tax delays or tax avoidance techniques. When you sit down with your tax planning advisor and draw up a tax plan, you think about ways to withhold or evade taxes by taking favorable tax law provisions that benefit taxpayers. You will find opportunities to collect tax credits and tax deductions and drive them up. Tax preparation means profiting from any tax benefit open to you under the federal tax code.
Tax planning goes hand in hand with tax preparation, which involves drawing up a strategy to meet the financial objectives for the short and long term. It is difficult to perfectly plan financially for your current or future situation without using tax planning strategies to meet your future financial and economic objectives.
If you cherish financial success, taxes are going to be a big money spent. Cutting down or even removing such taxes where possible is an important factor in protecting your property.
The key aim of tax planning is to ensure that the taxes are efficiently approached. Tax planning reduces your tax liability by using effective strategies that explore ways not only to lower taxes but also to secure a stronger future and retirement. Whether you are making $50,000 a year or $500,000 a year, it barely matters. You can find several ways to save money when you take the time to draw up a tax plan.
Why you need to plan your taxes
The main reason to plan tax is ultimately to have more money that you can either invest, save or even spend on new projects. Or maybe do all three. It’s your choice.
There are more good reasons to plan taxes.
1. TAX PLANNING AND MANAGEMENT WILL LOWER THE TAXES YOU PAY
Basically, tax planning is about cutting the tax bill. It’s important that you understand the facts and purposes related to tax planning. Tax planning:
- Is especially relevant if you own a business or are self-employed
- Makes sense when your investment returns have large unrealized losses or profits
- Is useful if you encounter a significant event in your life, such as marrying or divorcing, having a baby, buying a house or retiring
- Is helpful if you move to a new job or endure a substantial change in your salary, up or down
- Will help save money if you’re going to send one of your kids to college soon.
2. STRATEGIC TAX PLANNING LETS YOU MAKE THE MOST OUT OF YOUR TAX BENEFITS
Too often, people wait until the very last second seeking to take advantage of a tax benefit. While this sometimes works, effective tax planning requires you to give time to study the situation and take the appropriate decisions. Smart tax planning occurs throughout the year, not on the final day of the year or just a day before your taxes are due.
3. TAX PLANNING LETS YOU COPE WITH CHANGES THE IRS MAKES
Every year tax law is always a little different. Very often there are only minor changes, but the tax laws looked significantly different after 2017. Tax planning helps you to prepare for these shifts, whether minor or major, and to determine how you want to manage them and how they might impact your taxes.
4. TAX PLANNING HELPS AVOID DEADLINE DREAD
Regardless of the changes the government makes to tax regulations, there’s a definite midnight deadline on April 15 for decisions on how you want to deal with these changes and your taxes every year. Tax planning at the right time means that you are well equipped to respond to any uncertainty and in no danger of dreading the deadline. A specialist in tax planning and preparation will ensure you are prepared.
A tax planning consultant will also help you with:
- Timing of specific purchases
- Timing your investments to get the best possible returns and benefits
- Sorting investment options wisely
- Retirement plans
- Charitable donations
Now that you know the importance of tax planning in your personal and professional life, it’s important that you always take help from a professional tax planning consultant for your purpose who has years of experience in successful tax planning. Just like us at Smith & Smith CPAs. Besides tax preparation and planning, we will also help you with other financial and resource planning strategies to secure a promising future for you. Get the best tax planning consultant in Arlington TX today!