Little Rock, Fayetteville, Bentonville Indian Community - ArkansasIndian.com
| | |
 


 

Tax Planning vs. Tax Preparation: What is the Difference?

Money
Contributed by : Mukesh Makker
Add To My Favorite
Share With Your Friends



Many people assume tax planning is the same as tax preparation, but the two are quite different. Let's take a closer look:

What is Tax Preparation?
Tax preparation is the process of preparing and filing a tax return. Generally, it is a one-time event that culminates in signing your return and finding out whether you owe the IRS money or will be receiving a refund.

For most people, tax preparation involves one or two trips to your accountant (CPA), generally around tax time (i.e., between January and April), to hand over any financial documents necessary to prepare your return and then to sign your return. They will also make sure any tax reporting on your return complies with federal and state tax law.

Alternately, Individual taxpayers might use an enrolled agent, attorney, or a tax preparer who doesn't necessarily have a professional credential. For simple returns, some individuals prepare tax returns themselves and file them with the IRS. No matter who prepares your tax return, however, you expect them to be trustworthy (you will be entrusting them with your personal financial details), skilled in tax preparation, and to accurately file your income tax return in a timely manner.

What is Tax Planning?
Tax planning is a year-round process (as opposed to a seasonal event) and is a separate service from tax preparation. Both individuals and business owners can take advantage of tax planning services, which are typically performed by a CPA and accounting firm or an Enrolled Agent (EA) with in-depth experience and knowledge of tax law, rather than a tax preparer.

Examples of tax planning include the following: Bunching expenses (e.g., medical) to maximize deductions, tax-loss harvesting to offset investment gains, increasing retirement plan contributions to defer income, and determining the best timing for capital expenditures to reap the tax benefits. Good recordkeeping is also an important part of tax planning and makes it easier to pay quarterly estimated taxes, for example, or prepare tax returns the following year.

Tax planning is something that most taxpayers do not take advantage of - but should - because it can help minimize their tax liability on next year's tax return by planning ahead. While it may mean spending more time with an accountant, say quarterly - or even monthly - the tax benefit is usually worth it. By reviewing past returns, an accountant will have a more clear picture of what you can do this year to save money on next year's tax return.

If you're ready to learn how a tax and accounting professional can help you save money on your tax bill this year, don't hesitate to call the office today.


About Author
Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.

Website: https://taxprofessionalsnw.com/newsletter.php

 

Disclaimer: Please use this channel at your own discretion. These articles are contributed by our users. We are not responsible or liable for any problems related to the utilization of information of these articles.

 

View All Contributions

Post an Article
Notify Me of New Articles

Become A Featured Contributor
Add Your Blog | Add Recipe | Add Article

More Article by Mukesh Makker

Nikita Rawal gets a birthday surprise by her fans; watch her reaction
International Cricketing Legends to play for Friendship Cup UAE in Sharjah
IMPORTANT TAX CHANGES FOR INDIVIDUALS AND BUSINESSES - Jan 2020
View All Articles

Featured Contributors


Praveen Nair

Ananya Kiran

Darshan Goswami
Darshan Goswami

Dilip Saraf

Christine Dunbar

Aayushi Manish
Aayushi Manish

Shruti Sadolkar

Vasudha Sharma

Vivek Wadhwa
Vivek Wadhwa

Latest Articles

San Jose Resident Travels to D.C. to Urge Congress to Ensure Childhood Cancer Research Remains a National Priority by Priscilla Cabral
Discover Proven Strategies for Healthy Living Today by Anya Willis
4 Healthy Ways to Help You Maintain Your Sobriety by Anya Willis
Akshay Kumar unveils New BTS Video for "Bade Miyan Chote Miyan by Staff
Akshay Kumar Unveils Soul-Stirring Music Video "Shambhu" Dedicated to Lord Shiva by Staff
View All Articles