You work hard, provide an invaluable service, and your patients love you! Yet, when you look at your earnings, you realize a very large portion goes to the IRS. In fact, Uncle Sam might be taking 40% (or more!) of your income.
You may be wondering if there is a way to legally lower your tax liability. Of course, you want to pay your dues – you just do not want to be overpaying!
There is a way to lower your tax burden – at times substantially – and it is called tax planning. Tax planning involves an analysis of your financial situation to determine, and implement, strategies that will decrease your fiscal liability. A lowered tax burden, of course, frees up resources for growth, expenses, or investment – i.e. all the things you deserve in return for your hard work!
Tax planning is NOT the same as income tax preparation
Many people assume tax planning is the same as income tax preparation, but that could not be further from the truth. When preparing an income tax return, a tax preparer looks at past documentsto calculate whether you paid enough in taxes throughout the previous year. The preparer determines whether you owe the IRS money or will be receiving a refund. It is a passive and historical approach.
Tax planning looks into your future in order to determine what you could be doing in order to lower your tax liability. It is not a passive process. Could you be contributing to an IRA? Are you deducting everything you are eligible for? Are there any business strategies you could be taking advantage of? Is there a better way for you to be making charitable contributions? Do you qualify for any advanced tax reduction strategies?
Your current tax preparer may not specialize in tax planning; this is very common. Just like doctors have different specialties, CPAs also specialize in different fields. Just because a tax preparer does a great job preparing your income tax return does not mean they can help you lower your tax burden.
How tax planning works
Unlike income tax preparation, you do not have to do tax planning every year – in most cases it is enough to do so once every 5+ years.
Tax planning is usually conducted by a Certified Public Accountant with extensive knowledge of tax law, and not a tax preparer (who may or may not be a CPA).
It involves a research process and custom analysis of your entire financial situation to determine ways of lowering your tax liability. This includes: 1) maximizing your deductions; 2) optimizing your retirement and insurance structures; 3) taking advantage of strategies for business owners and self-employed individuals; 4) niche strategies (such as those pertaining to real-estate); 5) advanced tax planning strategies; 6) any other aspects of your taxes and finances that are important to you – such as funding your children’s education.
Following the analysis, a CPA will be able to pinpoint the strategies you can implement in order to lower your tax liability on an annual basis.
Who benefits the most from tax planning?
Some individuals will benefit more from tax planning than others – obviously, higher earners pay higher taxes, so there is more to reduce! We believe tax planning is most beneficial for business owners and self-employed individuals who pay at least $50,000 in taxes annually.
If you are a high-income earner, a business owner, or self-employed in the field of medicine or healthcare, and pay at least $50,000 in taxes annually, you may be needlessly overpaying in taxes by thousands of dollars on an annual basis.
Tax planning, unlike income tax preparation, will help you legally lower your tax liability while remaining in compliance with IRS regulations, and free up funds for the things that really matter in life – be it a vacation home or expanding a medical practice.
Ready to find out more?
If you are interested in finding out more about tax planning or would like to schedule a consultation and an analysis of your potential tax savings, feel free to contact us for a no-strings zoom call!
Schedule a complimentary call with us here: https://go.oncehub.com/PaulinaSzuszkiewicz1