18 Oct How You Can Benefit from Professional Tax Planning Services
Many people take a passive approach to taxes: You fill out your return, pay what you owe (or collect your refund), then do the exact same thing again next year. However, this reactive strategy can result in you paying thousands more in taxes over the years. That’s why we encourage our clients to take advantage of professional tax planning services in Provo, and choose a more proactive approach to their taxes each year. Keep reading to find out how tax planning and tax projections can benefit you.
Reducing Your Tax Liability
Some people may try to do a bit of their own tax planning each year, hunting down simple deductions that could lower their taxes. While this is certainly better than doing nothing at all, professional tax planning can do much more for you in terms of reducing your tax liability. That’s because we examine your projected taxes and finances over the next several years, developing strategies that save you more money throughout the years.
One simple example involves “bunching” your tax deductions. We’ve written an in-depth blog on bunching in the past, but here’s a quick review of what this means: Rather than taking the standard deduction every year, you can pay two years’ worth of qualifying itemized deductions in a single year—for example, making a large donation to your church in January and December of the same year, instead of in January of two consecutive years. This doubles your deductible expenses for that year, which could make it more beneficial to itemize; then, the following year, you would take the standard deduction, when your itemized expenses are much lower.
Bunching properly takes planning and foresight, which is why we strongly recommend that you work with a CPA to ensure you’re using this strategy effectively. This is also only one example of how we can help you reduce your tax liability with a long-term approach to your taxes. There may be many other strategies we can employ to save you money throughout the years. We invite you to reach out and schedule a consultation with one of our CPAs to learn more.
Being Prepared for Your Taxes
When you take a passive approach to taxes, you are essentially filling out your return and hoping for the best; and you’ve likely had the unpleasant experience of being shocked by what you owe when the paperwork is done. In some cases, you may end up owing much more than expected, and could find yourself unable to pay your tax bill.
While proper tax planning may be able to help you lower your tax bill, tax projections can also help you to be prepared, and avoid those unpleasant shocks that arise from blindly filling out your tax forms. We’ll look at your current finances and give you a careful estimate of what you’ll owe when it comes time to file. This can give you several more months to plan and save for that tax bill, rather than scrambling to find the funds you need before the payment deadline.
If an early projection still isn’t sufficient time for you to be able to pay off your tax bill, we can also help you work with the IRS to request a payment plan.
Making Decisions before the Year Ends
As you know, the taxes you’ll owe in the spring are based on your income and expenses for this year. If you don’t do any tax planning or projections, the opportunity to impact your tax situation will be largely closed by the time you file your return. Professional tax planning can give you a clear picture of your tax situation now, so you have time to make adjustments before the end of the year. For example, you could make additional charitable contributions, make some deductible purchases for your business, or deposit more funds into your retirement accounts. All of these can reduce your tax liability and put you in a better tax position come spring—but only if you start planning now.
If you want to gain more control over your taxes, rather than simply filing and paying every year, contact The Accounting Guys today. We’ll sit down with you to go over your financial situation and determine how professional tax planning in Provo can benefit you.