All productive societies charge taxes. It’s also one of the most frustrating expenses each of us face every year. Some of these taxes may be avoided, minimized or postponed with good planning. However, a saying in tax planning is “Don’t let the tax tail wag the economic dog.” Too often people make choices simply to avoid paying taxes. I have seen many business owners buy more costly equipment and vehicles costing more than what they actually need just so they can write off the expense. Frequently, it is better to pay the higher taxes and make choices that better fit the actual needs of the business.
Personal tax planning can help manage the timing of income and deductions. It typically includes determining how these may affect social security benefits and their taxation, estimated tax payments, the Alternative Minimum Tax and the Kiddie Tax.
Investment tax planning involves reviewing the investments for gains & losses, income from mutual funds, selecting tax deferred investments or tax-exempt investments if they are appropriate and many other topics.
Business tax planning also includes selecting the right entity for the nature of the business, various tax elections that must be made, selling business assets, structuring employee benefits and distributions to the owners.
Maybe the most important time for good planning is when you go through a significant life change. These include when you receive inherited wealth, a death in the family, retirement, marriage, divorce or a final illness.