How Tax Planning with A CPA Firm Can Save You Thousands on Taxes
Tax planning can save you hundreds to thousands of dollars on your taxes. If you’re not a financial expert and you need to make judgment calls based on extensive tax experience, hiring a CPA firm for tax planning can help you get the most for your money in the long run.
Tax planning aims to arrange your financial affairs to keep your taxes to the minimum. A CPA is well trained in tax planning and can provide valuable information on the best strategies you can employ to reduce your taxes for a given period.
Pay Less Tax
The most crucial reason you should prioritize tax planning is to pay less overall tax. With some planning and the input of a CPA, you can reduce your tax burden in the current year or future years. A CPA can help you find deductions and credits you probably didn’t know about. Most people benefit from tax planning but is it especially important to let an expert handle the taxes if:
•You are a business owner or self-employed
•You have a major financial event during the year like retiring, selling a home, marriage, divorce or had a child.
•You’ve moved, especially between states
•Your investments have significant unrealized gains or losses
•You’ve had a dramatic change in income (up or down)
•You’re sending a child to college for the first time
•You own a rental property
•The IRS contacts you, say, for an audit
There are several fundamental ways to reduce taxes such as lowering the amount of taxable income, taking advantage of tax credits/tax relief, allowing greater control of when taxes get paid and increasing your deductions. Each method has several variations, and a CPA is well equipped to choose the best strategies for your particular situation.
If you own a business, for example, there are numerous possible tax write-offs, and only a professional has the technical know-how to help you navigate them. The same applies if you’re doing significant work in the gig economy. If you’re selling products online or driving Uber, for instance, you might need help with your taxes.
Hiring a CPA for tax planning may be somewhat expensive, but in many cases worth the money spent. A CPA will provide value in complex situations. They can advise you on the best tax reduction strategies based on their experience and interpretation of IRS rulings.
If the IRS is auditing you, a CPA can represent you, so you don’t have to go it alone. You can also count on their expertise to provide as much relevant information as possible.
Take Advantage of Tax Law Changes
Every so often, at least nearly every year, the federal government changes the tax laws. Sometimes the changes are minor, with little significant impacts, and sometimes the changes are major, possibly having a massive impact on your total tax. Regardless of the type or number of law changes, the result is that what’s true one tax year may be untrue the next year.
Law changes make tax planning important, so you’re able to take advantage of the changes. Maybe you need to act before changes take effect. Or perhaps you need to hang on a little longer until the next year to benefit from a change in the law.
Working with a CPA on tax planning gives you an opportunity to take a proactive approach to the changing environment. CPAs are well informed about tax laws and can help you navigate the murky waters of tax planning to reduce your tax bill.
Allow for Enough Time to Implement Planning Ideas and Maximize Tax Benefits
While it’s possible to implement some tax planning strategies at the last minute, most require much more time for analysis and implementation. Tax minimization strategies such as legally shifting incomes between individuals or companies can take months or even longer.
If you run a business or have a rather complex tax scenario, it’s essential to start tax planning early enough, so you have the mechanisms in place to implement the ideas and gain maximum benefits from the process.
By planning ahead, you open a broad array of options to reduce your taxes.
Moreover, most tax planning ideas need to be implemented and actions taken before the end of the year.
