Americans consistently overpay their taxes leaving billions of dollars on the table with the IRS because most don’t use tax planning techniques. Sound financial planning combined with savvy tax planning can put that money back into taxpayers’ pockets.
Americans consistently overpay their taxes and leave millions of dollars on the table with the IRS. The major reason for this is that they simply are not aware of many audit-proof tax planning techniques. Why effective tax rates of many millionaires and billionaires are less than the effective tax rates of many ordinary working people? The answer is sound tax planning well ahead of preparing tax returns. Tax planning and tax preparation are not the same. Tax preparation consists of crunching all the numbers when preparing taxes every year whereas tax planning is done well in advance using all legally available tax reduction techniques and implementing them. Tax planning is not tax avoidance or tax evasion; it is a legal way to reduce tax liability.
Tax planning is not a one size fits all technique. What works for one group of people may be completely different for another group of people. Planning techniques used for physicians may be different than those used for young IT professionals. What works for a real estate professional may not work for an owner of multiple rental properties. Even retired people collecting social security can plan properly to reduce their taxes. Every body’s tax and financial situation is different. Customized plan is necessary for each individual family or business.
Harak Gala is a Certified Public Accountant (CPA) and a Financial Advisor who assists clients with tax and financial planning. Gala believes that both CPA and Financial Advisor are needed to get the best results for the clients. “These two professionals should work hand-in-hand to give taxpayers the very best results,” he says. “In the future, there will likely be more situations where these two skills are used in conjunction and clients are rewarded handsomely through ingenious tax-planning solutions.”
Gala’s new book entitled, “Cut Your Tax in Half” consists of real life case studies where effective tax planning strategies were used to reduce the client’s overall tax burden. “More and more people are now subjected to numerous types of taxes such as the Alternative Minimum Tax, Net Investment Income Tax, Additional Medicare Tax, and many others,” says Gala. “With effective tax planning strategies, these taxes can be eliminated or greatly reduced. This is something that clients are surprised, but excited to learn about.” The book emphasizes the importance of collaboration between CPAs and Financial Advisors to benefit clients.
Wealth building through better tax planning is not a new concept, but one that sometimes gets brushed aside without proper guidance. With help, however, tax planning is a legal and viable practice that anyone can take advantage of, though those in higher income brackets or individuals who own a business typically realize the most definitive and positive return.
In order to utilize these strategies and save, however, it is important to start early and pre-plan. Waiting until March or April – the time when most people start to think about their taxes – is too late. This is why both the expertise of a CPA and Financial Planner are needed. “Accountants file taxes but don’t look at the financial plan and financial planners may not be tax experts,” Gala advises. “Combining these two sets of knowledge will give a client the most value. Many people take a lot of risk just to get a few percentage of extra return on their investments but ignore tax planning completely when returns due to tax savings could be much higher without taking any undue risk. The time to start planning is now.”
Carolyn Sorrell & Funlayo E. Wood contributed to this article.
For more information, please visit http://www.etaxonline.com
