(How To) Plan for Taxes
Tax planning strategies can range from minimizing the amount the government takes from your paycheck to blending with investment and estate strategies, helping to mimimize the overall amount Uncle Sam thinks you should pay.
Tax Planning Quadrant Goals
1. File your taxes on time.
2. Maintain good records.
3. Go over your return each year to understand the “big picture” and review for accuracy.
4. Research ways to minimize your taxes. Check with your CPA.
5. Properly budget for taxes due:
a. Meet with tax advisor before year-end to calculate estimated tax.
b. Consider the impact of deferring income or expenses to next year.
6. Find a qualified tax professional. (CPA)
7. Meet with your CPA every 6 months.
8. Maintain a good understanding of tax laws.
9. Complete a 5 year tax projection.
______________________________
Choosing a Tax Preparer
As the April 15 tax return deadline nears this year, you may hear people advertising themselves as ”tax preparers.” What does this mean?
It’s important you know the answer to that question. While many taxpayers dread tax time, having your return prepared accurately by a knowledgeable tax expert can save you both time and money–and help prevent possible IRS penalties or audits in the future.
That’s why you need to understand the qualifications of the person who will be preparing your return. And this year, it may be a little more confusing to decide who is the most qualified tax preparer.
As of January 1, 2011, anyone who is paid to prepare a tax return must have registered with the Internal Revenue Service. Currently, there are no set qualifications for those who register, other than complying with the tax laws in filing their own returns. There are currently no minimum education or experience requirements to be registered with the IRS.
CPAs comply with extensive education and experience requirements. CPAs first must pass the rigorous Uniform CPA Examination in order to qualify for their licenses. This comprehensive exam tests how much CPAs know about a wide range of technical and business topics. Divided into four-parts, it has a total length of 14 hours. That’s not all that’s required to earn and maintain a CPA license, however. CPAs must also meet continuing education requirements to keep them up on new
business developments. State boards of accountancy also set their own requirements governing education, ethics and work experience. All in all, the regulations ensure that only highly qualified and knowledgeable individuals are able to call themselves CPAs.
While CPAs also must register with the IRS, it’s important to remember that not all tax preparers are CPAs. When a CPA prepares your return, he or she uses the depth of experience and extensive knowledge that enabled him or her to pass the CPA exam in the first place and to comply with continued education and experience requirements.
Your CPA also works with clients all year long, not just during tax season. CPAs spend their time outside of tax season helping clients with a wide range of issues, including future tax planning, college or retirement savings plans, or business issues. Other registered tax preparers may only work with clients during tax season, and may not have a big-picture understanding of the many financial issues that their clients face.
When you are choosing a tax preparer this year, remember that being a “tax preparer” does not guarantee a minimum level of education or experience. Ask specific questions about the tax preparer’s credentials, experience, education level and continued training. And keep in mind that if you work with a CPA, you can be sure that your tax professional meets rigorous testing and education requirements and has a high level of financial expertise.
You’ll find that your CPA can provide the advice you need on all your financial questions.
