Tax Planning

Many people think of tax planning on April 14th of each year, right before their income taxes are due. However, tax planning is a process of looking at various tax options in order to determine when, whether, and how to conduct business and personal transactions so that taxes are eliminated or reduced. As an individual taxpayer, and as a business owner, you will often have the option of completing a taxable transaction by more than one method. The courts strongly back your right to choose the course of action that will result in the lowest legal tax liability. In other words, tax avoidance is entirely proper.

Tax avoidance planning is legal, however tax evasion — the reduction of tax through deceit, subterfuge, or concealment — is not. Very often, what sets tax evasion apart from tax avoidance is the IRS's finding that there was some fraudulent intent on the part of the taxpayer. The following are three of the areas IRS examiners most commonly focus on when detecting possible fraud:

• A claim for fictitious or improper deductions on a return, or a taxpayer's claim of a large deduction for charitable contributions when no verification exists.
• A failure to report substantial amounts of income,
• Accounting irregularities, such as a business's failure to keep adequate records, or a discrepancy between amounts reported on a corporation's return and amounts reported on its financial statements.

There are countless tax planning strategies available, particularly if you own a small business. Some are aimed at your individual tax situation, some at the business itself. But regardless of how simple or how complex a tax strategy is, it will be based on structuring the transaction to accomplish one or more of these often overlapping goals:

• reducing the amount of taxable income;
• reducing your tax rate;
• controlling the time when the tax must be paid;
• claiming any available tax credits;
• controlling the effects of the Alternative Minimum Tax;
• avoiding the most common tax planning mistakes.

In order to plan effectively, you'll need to estimate your personal and business income for the next few years. This is necessary because many tax planning strategies will save tax dollars at one income level, but will create a larger tax bill at other income levels. You will want to avoid having the "right" tax plan made "wrong" by erroneous income projections. Once you know what your approximate income will be, you can take the next step: estimating your tax bracket.

The effort to come up with crystal-ball estimates may be difficult and by its nature will be inexact. On the other hand, the better your estimates, the better the odds that your tax planning efforts will succeed. And this is where we can help you. Of all the tax planning decisions you’ll make, the most important one may be to take advantage of our knowledge, experience and guidance. By listening to you like you are the only investor in the world, we can create and implement individualized tax plans, that can play a key part in helping you minimize the effects of taxes on your hard-earned money.

Get your tax planning secured by Los Angeles Tax Attorneys!

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