Why Tax Planning Helps You Save Money

April 2006

Timing … Options…. Smarter Choices.  All planning involves looking ahead to reach a specific goal.  To gain the most from tax planning it must be a consideration all year long.

Tax planning is not intended to help you cheat the government in some way or do anything against the IRS code.  Every taxpayer has the right to arrange his/her affairs so as to keep taxes as low as possible. 

Tax planning strategies usually involve determining WHEN is the best time to take certain actions with your finances; and/or determining the best way to report certain deductions or write offs for your personal or business situation.  Sometimes a transaction can be postponed without penalty, and it may be your best interest to take advantage of that option.

In general it is best to receive more income when taxes are low; and less income when taxes are high.  If your income is such that you change tax brackets frequently from year to year, you should definitely be consulting with a tax accountant to help you best manage these shifts. Making adjustments may help you postpone payment of tax or let you shift some income or deductions to a different tax year to at least lower your taxes.

Buying and selling property can create some tax planning opportunities. Retirement planning will involve decisions regarding tax and financial planning options.

Tax Planning for Your Business. Tax planning is critical for the business owner.  A business owner needs to develop a strategy in regards to the timing of large purchases, and other payments. The business owner must also factor in depreciation.  These considerations are paramount to ensuring the stability, growth and viability of your business in this volatile economy.

You should strongly consider tax planning if any of these items on your return are significantly more or less than last year: Income, Deductions, Income Tax Withholding, or Estimated Tax Payments.

You should consult with your tax accountant for planning purposes BEFORE you make a decision about any of the following:  borrowing money for any purpose; paying off a loan; contributing or taking funds from a retirement plan; buying or selling any property; retiring; getting married; negotiating a divorce; making a large gift to a relative; making an investment where your participation will be minimal; changing your business structure to a partnership or corporation; incurring business expenses as an employee; holding an uncollectible note; or moving.