The average family of 4 pays more in federal, state, and local taxes than it does for food, clothing, and shelter combined! Therefore, it goes without saying that tax reduction through proper and timely planning is vital to any family’s budget.
With the dramatic changes in the new tax law enacted this year, careful planning is more important than ever! The provisions of the law are complex and go into effect at different times – some immediately, others not for several years. Unless you know what to do at the proper time, you will not be able to take full advantage of the new opportunities to save tax.
Tax planning is simply arranging your tax-related transactions in order to either permanently escape tax, defer the payment of tax for one or more years, and/or ultimately pay the tax at a lower rate.
The reason year-end tax planning is so important is that, once a year is over, there are virtually no opportunities available to minimize taxes for that year. Proper planning involves an analysis of each taxpayer’s unique situation and provides recommendations for reducing taxes. This is done by taking into account what has occurred and can still occur in 2001 as well as reasonable projections of income and deductions for 2002 (and in some cases later years). The objective is to reduce the combined tax burden for both years. If you put it off, you run the risk of missing out on many strategies that could considerably reduce your combined 2001 and 2002 taxes. Regrettably an alarming number of tax practitioners do not offer this valuable service and their clients could, and very often do, pay a BIG price unnecessarily.
There are other good reasons for year-end planning. By having a projection of your 2001 taxes you will not be surprised when you get your returns, and it allows you several months to plan for potential payments. If applicable, it also provides an opportunity to have additional tax withholdings in order to avoid penalties for underpayment of estimated tax. Conversely, if you are making quarterly payments and find that you are overpaid for the year, you may wish to cut back on your fourth quarter estimated tax payment that is due on January 15, 2002.
I would be most happy to assist you in saving money through lower taxes.
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