What is tax planning?

Tax planning is the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. Considerations of tax planning include the timing of income, size, purchases, and planning for expenditures. Tax Network USA offers tax planning services to help our clients lower their taxes for years to come.

Why is tax planning important?

Tax planning is an important part of financial planning. It ensures that you will save on taxes while also meeting the legal obligations and requirements.

When you plan your taxes, there is less likely going to be financial surprises that you need to fulfill.

The main reason for tax planning is to save money and mitigate one’s tax burden, although that is not the only reason to tax plan.

We can help with:

• Forward thinking tax planning
• Understand how your financial products work
• Learn how to coordinate your products
• Measure performance
• Compare financial decisions
• Eliminate financial errors and omissions

What are the benefits of tax planning?

The benefits of tax planning consist of having your finances in order, knowing how much you owe in taxes, and having a plan in place ensuring you will not have to write unexpected checks.

How to start tax planning

 

1. Get organized

Ensure that your finances are in order by saving relevant receipts, documents, and continuous billing. If you need help getting organized, you can use online resources such as Quick Books. You can snap pictures of receipts and invoices and file for when you do your tax planning with Tax Network USA.

The list below are things you should include if applicable to you:

• Forms W-2 from your employer(s)
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan
• Form 1099-K, 1099-MISC, W-2 or other income statement if you worked in the  gig economy
• Form 1099-INT if you were paid interest
• Other income documents and records of virtual currency transactions
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance Premium Tax Credits for Marketplace coverage
• Letter 6419, 2021 Total Advance Child Tax Credit Payments to reconcile your advance Child Tax Credit payments
• Letter 6475, Your 2021 Economic Impact Payment, to determine whether you’re eligible to claim the Recovery Rebate Credit

 

2. Contact a Tax Professional at Tax Network USA

Once you are organized to the best of your ability, it is time to talk with a tax expert.
Our tax professionals are equipped with the knowledge to help you make the best decisions when it comes to tax planning. Whether you are a new investor or an established business owner, we can help you with your tax planning.

Frequently Asked Questions About Tax Planning

What are tax planning strategies?

Tax planning strategies vary between each individual client. Our tax professionals will help you determine what tax planning strategy is good for you.

Who needs tax planning?

Anyone who would like to stay organized with their taxes. Whether it be an individual investor or a small business owner.

What is the difference between tax avoidance and tax evasion?

Tax avoidance is structuring your affairs so that you pay the least amount of tax due. Tax evasion is lying on your income tax form or any other form.

What is the federal gift and estate tax?

The federal gift and estate tax is essentially a tax on the transfer of wealth. Every estate is potentially subject to the federal gift and estate tax; however, every taxpayer is also entitled to an exemption. Federal gift and estate taxes are levied on the combined total of the value of all gifts made during a taxpayer’s lifetime and the value of all assets owned by the taxpayer at the time of death. Although the federal gift and estate tax rate fluctuated historically, the American Taxpayer Relief Act of 2012 (ATRA) permanently set the rate at 40 percent.

What is “portability”?

Portability refers to a surviving spouse’s ability to use any unused portion of a deceased spouse’s lifetime exemption. For examples, imagine that Ronald and Cindy are married. Ronald passes away in 2019 leaving behind an estate valued at $9 million. Ronald’s estate would use $9 million of his $11.4 million lifetime exemption. The remaining $2.4 million would “port” over to Cindy. Cindy would then have a $13.4 million exemption (Cindy’s $11.4 million plus Ronald’s $2.4 million = $13.4 million) that can be used when Cindy’s estate is probated. Keep in mind that these figures only work while the increased lifetime exemption amount is in place.

What is annual exclusion?

The annual exclusion is an extremely beneficial tax avoidance tool that allows each taxpayer to gift up to $15,000 in assets to an unlimited number of beneficiaries each year tax-free. Couples can gift-split and gift assets valued at up to $30,000. By way of illustration, a married couple with four children could transfer $120,000 in assets each year without using any of their lifetime exemption.