Smart Tax Planning Guide
Is tax planning really necessary? If you are super wealthy and very generous to the taxing authorities, then the answer is no. For the rest of us, however, tax planning is a smart idea. In general, the more money you make, the greater the importance of tax planning. Each dollar you earned above a particular tax bracket may put you into a higher tax bracket. This is known as marginal tax rate.
Correct tax planning mandates precise actions with meticulous consideration among a wide spectrum of financial knowledge (tax, financial planning, real estate, and so on). Look for a firm with such resources because your decision today will greatly impact your wealth tomorrow.
Purpose and Objective of Tax Planning
The first goal of tax planning is to avoid any underpayment penalties and interest assessments caused by failure to pay estimated tax. Through tax planning you will know: (1) If you are required to make estimated tax payments (2) When you must make estimated tax payments (3) How much you must pay.
The second goal of tax planning is to gain better control of your money by estimating your taxable income, hence your tax liability for the next year. In this way, you can avoid both underpayment and overpayment, and any deferment amount can be directed toward appropriate financial ventures or investment.
Lastly, tax planning can create effective and legitimate tax strategies to lessen your overall tax obligation.
Target Candidate for Tax Planning
- Real Estate Transaction: If you sell real estate property, you will be subjected to capital gain. The amount of your capital gain will be added to your other income sources, thus pushing you toward a higher tax bracket. We recommend you consult with a competent tax professional before selling your property. For guidance in picking the right tax professional, see our article entitled “How to Pick the Right Tax Accountant.”
- First Time Homebuyer: Most homeowners will benefit by itemizing their deductible expense items. To ensure both accuracy and benefits, you need to know what documents you should keep in order to maximize your tax deduction.
- Business Owners: Whatever your business entity you should review your personal tax annually and business tax at least quarterly. Doing so will help you see how you should expense your revenue before the closing of the tax calendar.
This guide is not intended to be exhaustive. It is a starting point to help you understand the importance of tax planning. For more information contact us at 424-999-8829.Google+