No one likes the IRS. No one loves paying taxes and, with the exception of accountants and CPAs, not many love filing taxes.
Filing your taxes is NOT THE SAME as TAX STRATEGY PLANNING – these are two different disciplines that require two different types of education and understanding.
Tax Filing boils down to audit and compliance: are we following the tax rules as written? Let’s ensure we maximize deductions within reason and minimize or defer tax liability as much as possible so we don’t raise eyebrows at the IRS.
Tax Strategy Planning looks a lot more like an investment strategy – review all the available options for reducing the tax liability over the long term and find ways to invest funds for longer-tail revenue streams while deferring taxes in the near term. Tax Planning is a sophisticated strategy used by elite earners to take what would be tax revenue and make it work for them instead.
The bridge between them looks like this: when Tax Planning is done right, Tax Filing is a breeze.
Planning Comes First:
Most taxpayers know April 15 is the tax filing deadline. The majority of Americans meet that deadline by starting tax preparation in the first quarter.
But Tax Planning? That comes much earlier (and should be happening all year). There is little a seasoned tax planner can do for you past a certain point in the year. Experts agree, start your planning process early in the fourth quarter to maximize the investment strategies they deliver.
Planning is only one part of the process – putting those plans into action must happen before the end of the tax year to be most effective for you. And if you are self-employed, an entrepreneur, physician, in Real Estate sales or investment, your income changes year to year – so too will the strategies you employ to defray and minimize tax liability.
It’s All About the Documentation:
Tax strategy planning is, by nature, aggressive. Your Strategist often knows the tax code better than an IRS agent. For this reason, good strategists substantiate each tax strategy curated for a client with documentation. You want a provider who will do all the leg work versus simply hoping the IRS agent reviewing your return is up to speed on the Augusta Rule or super familiar with Captive Insurance.
Prosperity Tax Advisors delivers tax strategy expertise along with all the documentation (the part no one wants to do because it’s tedious). But, when done properly, it can make your filing bulletproof.
No Surprises:
A common complaint among filers is a surprise liability – they owe something they never saw coming. The upfront work of Tax Planning, performed months before EOY, delivers expected results; you know going in exactly what the outcome will be. No surprises.
Who Benefits The Most from Tax Planning?
It comes down to two things: Complexity and Volume.
Complexity: Business owners with multiple entities or complex structures.
For example, entrepreneurs whose interest stretches over a number businesses. Do you have multiple Schedule Cs on your return? Tax Strategy Planning may benefit you.
Volume: Large Tax Liability – filers with $200,000, $500,000, $1 million or more as a tax liability benefit most from tax planning strategies, but the key is to start now. There is little a strategist can do for the current tax year if you wait until late December.
The more you owe or the more complex your business is, the more you can benefit from advance tax strategy planning.
Planning is Not Enough
Planning is step one – understanding which specific tax strategies can benefit your situation is the starting point. Knowledge alone is not enough – your planner should have the capability and access to deploy and document these strategies to support your filing. This makes your return defensible.
If the only two certainties in life are death and taxes, you need help with one so it does not cause an early version of the other. Use a CPA or other authorized tax preparer to file your return. Make their job easier and faster by starting with a Tax Strategist early in the year to minimize your tax liability and offer investment opportunities for your future instead of paying the government.
Prosperity Tax Advisors combine decades of private wealth management; forensic accounting and tax code experts to deliver (and activate) customized strategies. We do the leg work, develop the documentation and citations that make the filing a breeze. The time investment is huge, and so is the payoff.