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Tax Planning vs. Tax Preparation


Many taxpayers think of taxes only once per year: during the tax season. While this is sufficient for covering the return filing obligation, most forward-looking tax strategy must be thought of proactively ahead of time. This is the main difference between tax preparation and tax planning.

Tax preparation is backward-looking: although there are opportunities for optimization, deductions, and strategy in the prior year, many of these opportunities start to be phased out by the IRS unless implemented by year-end. Also, since tax preparation is often done in the most busy time in the season, many accountants will focus on timely preparation and will ask that tax planning for future years be scheduled outside of the busy weeks from March to April

Tax planning is forward looking and goes over some of the items below:

  • Should I file jointly or separately?
  • What tax benefits do I have from my home purchase?
  • Are there any tax breaks related to my children that I have not thought of?
  • What deductions can I take for my dormant or startup company?
  • How do I get the most out of my 401k, HSA, etc.?
  • How does a Roth work and should I use it?
  • What business deductions may apply to me that I have not considered? If I am filing as an employee, what else can I do to minimize my tax exposure?
  • Should I exercise my stock options or sell my equity?
  • Is my company withholding enough from my pay to adequately cover my tax obligation?
  • Will I owe taxes this year and if so, what can I do to prepare?
  • What programs are there for deferring tax liability?
  • Should I move states? What are the tax effects?
  • I am not quite sure about my prior year returns & if I used the most possible deductions/tax benefits. Can you check for me?

These are just a few small examples of the questions we see on a regular basis. To address some of these, we have two main checklists: one for business and one for personal. Those checklists go over some main deductions and strategies. Let me know if you need either one.

Regarding timing, if you need to review your tax profile for this year (2023) or prior years to ensure nothing is/was missed, this is the time to do that. As we approach year-end, many tax practitioners will have their hands full with year-end closing tasks, and many deductions and strategies need time to implement. Also, the IRS has deadlines on many tax breaks & the related setup.

Please contact us as soon as possible if you need help with this. Or, if you just want to spot check the strategy checklists, just hit “reply” for assistance.

George Dimov CPA

(833) 829-1120 toll free

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