BHT&D Certified Public Accountants Blog

Tax Planning Now Could Reduce Your Tax Liability.

Posted by Dwayne Houghton on Tue, Oct 14, 2014 @ 08:54 AM

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Tax planning this fall could mean more money in your pocket at April 15th.

As we enter the final quarter of the current tax year, it is time to consider a meeting with your qualified tax professional to review your anticipated income and deductions, and determine whether or not changes can or should be made that can lead to an overall reduction in your tax liability for the current and future years.

In addition to the traditional income tax, most taxpayers are aware that there are other taxes but do not understand how they apply to themselves.  Other taxes include the alternative minimum tax, the net investment income tax and the additional Medicare tax, to note a few.

Each of the taxes has an income level that triggers that tax.  As part of the planning process, your qualified tax professional will review your information to determine which of these taxes may impact you.  The next step in the process is to determine what strategies may be available to reduce income to a point where a particular tax no longer impacts the taxpayer.

Planning involves the acceleration or deferral of income and/or deductions to achieve the desired outcome.  When evaluating what income a taxpayer may be able to defer to a future tax period, your tax advisor must make sure that the deferral does not violate the constructive receipt doctrine.  Simply put, if income is made available, or otherwise credited to a taxpayers account before the end of the tax year, that income is includable in the taxpayer’s income, whether or not it is physically received.  Accelerating income may involve selling stock before the end of the year, disposing of a business ownership interest or receiving an anticipated bonus early.

Tax deduction may be accelerated by paying the expenses for a future tax period during the current year.  Examples of this include paying property taxes or state and local income tax liabilities that are owed but not due until the following year. Charitable contributions can be paid earlier than originally planned.  It may involve selling a stock or business ownership interest that will result in a deductible loss or a loss that will offset other similar income.  For businesses or self-employed individuals this may involve taking advantage of allowable forms of accelerated deductions, such as depreciation on assets purchased for use in a business during the tax year.

Due to the fact that each taxpayer may be impacted differently by the tax law, we do not advise that you undertake a specific strategy simply because another taxpayer has been advised by their tax professional to do so.  You should review your particular tax situation with your qualified tax professional to achieve the best results.

Tax planning is a major component of the services we offer all of our clients at BHT&D CPAs.  If you are interested in this service please contact one of our tax professionals.

 

Tags: Individual Tax Return, Tax Planning, Tax Deductions, Retirement Plan, Business Tax, Tax Return, Farm Taxes