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Tax Planning vs. Tax Preparation

Tax Preparation vs. Tax Planning

Source:  CPA Site Solutions Research and Writing Team, Newsletter, October 2019 Issue.

Many people assume tax planning is the same as tax preparation but the two are actually quite different. Let's take a closer look:

What is Tax Preparation?

Tax preparation is the process of preparing and filing a tax return. Generally, it is a one-time event that culminates in signing your return and finding out whether you owe the IRS money or will be receiving a refund.

For most people, tax preparation involves one or two trips to your accountant (EA, CPA, or non-licensed accountant), generally around tax time (i.e., between January and April), to hand over any financial documents necessary to prepare your return and then to sign your return. They will also make sure any tax reporting on your return complies with federal and state tax law.

Alternately, Individual taxpayers might use an enrolled agent, attorney, or a tax preparer who doesn't necessarily have a professional credential. For simple returns, some individuals prepare and file their own tax forms with the IRS. No matter who prepares your tax return, however, you expect them to be trustworthy (you will be entrusting them with your personal financial details), skilled in tax preparation and to accurately file your income tax return in a timely manner.

What is Tax Planning?

Tax planning is a year-round process (as opposed to a seasonal event) and is a separate service from tax preparation. Both individuals and business owners can take advantage of tax planning services, which are typically performed by a Certified Public Accountant (CPA) or an Enrolled Agent (EA), with in-depth experience and knowledge of tax law, rather than a tax preparer.

Examples of tax planning include bunching expenses (e.g., medical) to maximize deductions, how to use tax-loss harvesting to offset investment gains, increasing retirement plan contributions to defer income, and best timing for capital expenditures to reap the tax benefits. Good recordkeeping is also an important part of tax planning and makes it easier to pay quarterly estimated taxes, for example, or prepare tax returns the following year.

Tax planning is something that most taxpayers do not take advantage of - but should - because it can help minimize their tax liability on next year's tax return by planning ahead. While it may mean spending more time with an accountant, say quarterly or even monthly, the tax benefit is usually worth it. By reviewing past returns an accountant will have a clearer picture of what can be done this year to save money on next year's tax return.

If you're ready to learn more about what strategies you can use to reduce your tax bill next year, help is just a phone call away.

Your appointments may be scheduled at https://www.remotebusinesssolutionsinc.org/Appointments.php 24/7.  Once on the page, please select the 15-minute phone call option.  A calendar of openings will populate so that you may click on the opening you want.  Complete the required information on the form and hit the submit button when finished.  You will receive a confirmation once complete and an e-mail notification will go to your e-mail box.  Jeanine will be informed of your appointment and will call you at the phone number you provide at the scheduled time.  

Jeanine is federally licensed (by US Department of the Treasury) as an Enrolled Agent (EA), by the US Department of the Treasury, to represent taxpayers before IRS hearings.  She also holds a ParaLegal Certifcate from an American Bar approved program.  Her indepth knowledge of tax law and legal procecures uniquely qualifies her to assist attorneys with tax research, tax planning, tax preparation/review, taxpayer representation, and tax litigation.

Please schedule a free 15-minute phone call at https://remotebusinesssolutionsinc.org/Appointments.php to discuss your needs and concerns for attorney assistance in tax law cases for your clients.

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