The Difference Between Tax Planning and Tax Preparation
As 2016 is coming to a close and we are planning the holiday celebrations before you know it, many of us will turn our attention to taxes. After all, the
IRS is expecting to hear from us by April 15th. You may have your
trusted accountant taking care of the numbers for you or you’ve gone the DIY
route and you’re using TurboTax or a similar program. You or your accountant is
looking back over 2016, finding every possible way to maximize your deduction
to minimize your tax liability. In a nutshell, this is tax preparation.
You’re looking
for deductions related to property tax or mortgage expenses. Or if you had a
significant amount of medical expenses, tallying more than 10 percent of your
adjusted gross income, you may have yet another potential deduction. In many
ways, a bulk of tax preparation is finding these deductions, which can add up
to incredible savings for the year.
On the other
hand, there is tax planning. Rather than looking back at the past year, tax
planning involves looking forward five, 10, or 20 years. When you plan, you
consider what you can do to keep your tax burden to a minimum, while
positioning some of your savings to generate a tax-free income.
For example, if
you had an additional $30,000 in income every year, but that income was taxed
at the federal and state combined rate of 30 percent, you would be left with
only $21,000. Through careful tax planning, you could change a loss of $9,000
into a gain.
That’s where we
come in. We can show you how to take that additional income from taxable to tax
free. Let’s go back the example of $30,000. When that amount is tax free, you
get to keep that $9,000 you would have otherwise given to the state and federal
government.
Now, you can use
that money however you see fit. Use the tax savings to take your kids or grandkids
to Disney World. Treat you and your spouse to a dream vacation. Or, continue to
save. We would rather see you get the most out of your money and enjoy the
money you worked hard to earn, rather than see it lost to unnecessary taxes.
Think about the long-term
tax savings. If you’re generating $30,000 in additional income, over one year
you can save $9,000. Over 10 years, that’s $90,000 in tax savings! In 20 years,
it’s an incredible $180,000! And this is on top of your standard income.
If you’re interested
in planning your tax future and you want to know how you can save, year after
year, give us call at 816-220-2001. You can set up a 15-minute strategy session
with myself. We’ll work with you
to find the best solution for your tax situation, and we’ll even generate a
report detailing what you can do to plan for your financial future.
Phone: 816-220-2001
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