Tax Planning Tips – Another tax year as come and gone, well at least for most of us. Yes, there are those who hate doing their taxes and put it off till the very last minute which in the case of filing an extension is October 15th. Couple of thoughts on the subject of tax planning.

Tax planning vs. tax preparation

Don’t be confused, two separate processes.

Tax planning is the process of determining in advance methods and strategies for saving tax dollars. Certain tax strategies involve tax credits which are dollar for dollar reduction in tax liabilities and tax deductions which are not quite as good as tax credits; tax deduction reduce taxable income and amount saved in taxes will depend on your specific tax bracket.

Tax preparation is the process of completing all the necessary forms, schedules, etc. for filing your tax return. If you haven’t done tax planning, it’s too late in tax preparation stage to reduce your tax liability.

When considering the actual filing of your taxes you can either do it yourself or hire a tax preparer. Not all tax preparers are created equal. I highly recommend you interview your preparer in advance to determine how many years of experience they have. The tax preparation firms such as HR Block have significant turn over with many inexperienced preparers.

Dan