INDIVIDUAL TAX PLANNING

For individuals or couples who are not self employed but are generating income from approximately $50,000 on up, tax planning may be merited. Although tax considerations should never be the investment “tail that wags the dog”, taxes are a consideration. Many people have invested in mutual funds, only later to become aware of the fact that a fund may decrease in overall value and still pass taxable capital gains through to shareholders. If these funds are monitored during the year, capital losses may possibly be generated to offset these gains. If an individual has debts to pay, a home equity loan may be valuable. The home equity loan provides a greater mortgage interest deduction for tax savings that may be used to pay down debt. An area of individual tax planning such as deferred compensation arrangements, as the name implies, is impossible to take advantage of unless it is planned for during the year. I once had a prospective client inform me that he had his own unincorporated entity and was also employed as a W-2 employee. He then went on to tell me how he didn’t have to worry about taxes until after December 31 and he was not in need of any tax assistance. Perhaps he could have made good use of a deferred compensation arrangement or retirement planning or the advantages of incorporation. I’ll never know, and neither will he.


If you’re a business owner who is not concerned with taxes until after December 31st, you’re not doing yourself any favors. An S Corporation or LLC provides the business owner with a myriad of tax planning options not open to the sole proprietor. Tax strategies that “flow through” entities provide are substantially greater than those afforded to other taxpayers. Many business owners only have contact with their CPA after year end, and then only to give them numbers to put on the corporate tax form. In this situation, many planning opportunities are lost and that of course causes a greater tax liability than necessary. More times than not, the money saved by not paying accounting fees during the year are paid many times over to the IRS after year end.




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