Do you usually expect a refund after completing your taxes? Or are you usually expecting to owe? Whether you are expecting a refund or balance to pay this tax season, you shouldn’t be waiting until the last minute to file your taxes. Early bird taxpayers can receive faster tax refunds, extra time to pay any taxes you owe, and prevent tax return identity theft – and you can, too! If you’re unsure about tax preparation vs. tax planning, this blog will help explain.
What is Tax Preparation?
Tax preparation is done by the filer, via Turbo Tax or some other software themselves, or a professional on behalf of the filer (i.e. CPA, enrolled agent, etc.).
The filing of taxes is done after the commencement of the calendar year in which the incomes/expenses/deductions/etc. was claimed for (i.e. the year before the tax return is actually completed).
At this point, after December 31st of that previous year, other than a traditional IRA deduction and a few other strategies, there is no way to significantly alter your tax obligation from the previous calendar year. Thus, tax preparation, is done in a reactive or ‘rear-view mirror’ style of execution.
What is Tax Planning?
Tax planning is done throughout the year in which those incomes/expenses/deductions are accounted for, and before December 31st of that tax year.
If you can make a change or implement a strategy that could save you tax due in the upcoming tax season before the end of the year, wouldn’t you want to? Most people don’t realize that it’s throughout the year that planning appropriately can save the most in future tax owed, rather than working with a tax professional during their peak tax season.
Truth be told, the majority of tax professionals focus the greater part of their time preparing tax returns and not necessarily focusing on helping filers plan for the next year of possible tax savings strategies. No one is at fault for this; it’s just commonly how the industry works.
Unless you’re working with someone who is spending specific time on reviewing your tax return in coordination with your investments/wages/expenses/etc., you probably are not getting tax planning advice; you are simply getting your taxes prepared.
Contact Chatterton for Tax Planning Services
At Chatterton & Associates, we are firm believers in taking a proactive approach to all things financial in one’s life, and a massive part of this comes from ongoing and strategic tax planning all throughout the year. Our team of tax planners look for opportunities and strategies to lower our client’s tax obligations in any way that we can, for the current year and the entire foreseeable future.
If you are not tax planning before you are tax preparing, you could be missing out on a more favorable tax bill, or perhaps, maybe even a greater return. Receive your complimentary proactive financial review online or speak with an advisor today.