• Some of the best tax plans originate with client generated ideas. Taxpayers who inform themselves about the basic tax laws and start brainstorming or passing ideas by their tax advisor typically end up with excellent tax results.

 

  • A tax advisor who is curious and asks questions about your information is likely a competent tax advisor. This is the same person who probably has been to your business and wants to know what you have planned for the upcoming year and can offer suggestions while discussing your circumstances.

 

  • Typically there is not one single tax saving strategy that reduces your taxes, but rather it is a combination of several techniques that produces good results. For example, wisely using accelerated depreciation methods while taking advantage of tax credits can produce a low tax burden in year #1 which also reduces estimated tax payments for year #2.

 

  • Many good tax results are from a tax advisor who explains why an area of the tax law is not clear cut and is able to offer the client options on how to proceed. There are circumstances where both the taxpayer and the IRS can be correct. Many times a good tax result is from taking a justifiable position, even though the IRS could assert tax law to the contrary.

 

  • Good tax planning does not waste tax deductions. There are circumstances when a taxpayer should not take a deduction in year #1 because the tax savings is not as great as it could be by saving the deduction for a later year. Some deductions are deferred by making elections while others are deferred by delaying expenditures.

 

  • Sometimes the focal point of a good tax plan is simply deferring paying the taxes. For example, there are circumstances where taxes are going to be due, but flexibility exists in timing the year they are due.

 

  • Good tax planning sometimes dictates paying some taxes now because paying now will be less expensive than paying in a latter year. This is especially true when a taxpayer is currently in a low bracket year. In these cases, the optimal tax strategy may be to recognize income earlier than what you originally planned or delaying an expenditure.

 

  • Sometimes losses, especially flow-through losses from partnerships and S corporations, are not deductible in the year incurred. Good tax planning can help determine the best year to deduct losses. A similar theory applies to capital loss carry forwards.

 

  • Tax planning should also consider how to reduce payroll and self-employment taxes.

 

  • Good tax planning always considers the non-tax aspects of the circumstances and merges tax laws with financial prudence.