Tax planning is an integral piece of a proper financial plan. The fact is many people do not concentrate on tax planning. I have seen this truth in my practice through new clients who often tell me, “My tax guy never talked to me about how to lower my tax bill through tax planning.” Most folks handle their taxes in a reactive manner versus a proactive approach. They dump their tax documents on the tax preparer’s desk and hope for the best. This is a recipe for disaster.
Understanding the impact taxes will have on your financial well-being is essential, especially for those who are self-employed. Take time to plan for the current year and make adjustments to create positive momentum. There are always new laws and changing provisions in the tax code, which, again illustrate the importance of planning.
Taking control of your taxes and saving tax dollars is what tax planning is all about. Some of the biggest savings associated with tax planning can come from ideas that are very simple, such as saving a percentage of your income to cover estimated taxes or retirement contributions (if you are self employed), or increasing your 401K/403B contribution while adjusting your W-4 so your paycheck is not affected (for those who are employees).
Like many other aspects of your financial life, through knowledge and understanding can come clarity and improvement. Take control of your taxes. Remember that taxes are the single largest recurring expense that must of us will have throughout our lifetime. The tax code is quite complicated, so talk with your Financial Advisor or tax preparer about helping you plan accordingly.