Why is it important to tax plan?
US taxpayers just completed filing for their returns on the extended July 15 deadline. With that being done, taxpayers feel a heavy burden being lifted off their shoulders and are tempted to relax and wait for next year.
But that should not be the case. For you to save more on your returns, the journey begins now, especially if you are to use tax planning as a tool to save you thousands of dollars. In short, tax planning is important because it helps you pay less in tax and grow your income.
What then is tax planning?
This is the analysis of your financial situation or standing, especially from the tax perspective. When you do this, you are trying to ensure efficiency in your tax payments. With this, your plan is to reduce your tax liability (the amount you owe the IRS) as you increase your ability to make contributions towards your retirement plan. Basically, tax planning uses things such as deductions, allowances, and exemptions to reduce your tax liability.
Now that you know what tax planning is, here are a few ways that you can employ to do your tax planning;
- Purposive Tax planning
- Permissive tax planning
- Long-range and short-range tax planning
The above cover many things, for example, contributing to an Individual Retirement Account (IRA) every month and many other specific actions you can use to plan your tax.
To know more about these, we recommend that you take the time to watch Folasade’s video as she explains 3 ways to save money using tax planning. You may also need to speak to us, feel free to do so through our website, or give us a call to speak directly to one of us. Never allow this opportunity to go past you while others are saving thousands through tax planning.