Manage episode 330360936 series 1435204
Would you rather look back on the past and regret what happened or would you rather look to the future and make plans so that you can choose the outcomes you want? The latter of course! But when it comes to taxes, most people take the first option without even realizing there are better choices. Learn about the difference between tax preparation and tax planning, and how you can create a comprehensive wealth strategy for your future, but you have to start now.
- There's a huge difference between a tax preparer and a tax planner. Generally speaking, a CPA is a historian who's looking backwards over the last year's tax situation using tax software for determining whether you owe or whether you'll receive a refund.
- If you’re getting a refund, they give you the good news with a smile. If not, they make the suggestion of an IRA contribution to lessen the pain.
- With a tax deductible account, you are allowed to defer taxes on contributions until the age of 59 and a half. You can’t access that money before that age without a penalty and are required to take distributions by age 72.
- By imposing a 50% penalty for failure to follow the rules, the government taxes 100% of the contribution and any gains at a rate to be determined in the future. This level of trust in the government to manage your finances is not always the most comfortable deal.
- You exchange paying taxes today for paying taxes in the future at an unknown rate. Deferring taxes is not saving you from having to pay taxes.
- However, tax deferral makes sense in two scenarios: You are a high income earner now and will drastically reduce your lifestyle in retirement, or if you don’t already have large, well-funded retirement accounts already.
- The desire to reduce taxes is never going to go away. You will pay the taxes owed now or you'll pay them later. If you choose to pay them later, you are gambling that both your income and tax rates will be lower.
- When you’re working with a tax preparer, remember that funding a retirement account does not actually save you on taxes.
- As a W2 employee, there is not a whole lot you can do to reduce your tax burden. Business owners and people with larger amounts of assets can benefit tremendously from digging into the tax code.
- There are 5800 pages in the tax code, and less than 30 of them are about raising revenue for the government. The majority deals with how business and investment incentives can actually lower taxes.
- Most tax preparers only focus on those 30 pages, and that’s why their clients miss out on opportunities that exist in the other 5770 pages.
- Most people and business owners work with tax preparers, but spend very little time with tax planning.
- The government uses these incentives to encourage businesses and investors to invest in ways that are beneficial to the goals of the government, but many tax professionals narrow their focus and don’t know what the possibilities are.
- For any of these professionals to break away from the status quo training they receive, they have to do the hard work of learning for themselves what they need to know, then moving out of the center lanes to professionally guide their clients. Partnering with a skilled wealth advisor is the secret to creating a comprehensive tax planning strategy for clients.
- The way to go about this is to find a team that has already been assembled because it costs a lot of money and time to form such a team.
- For tax professionals that want to find a team to plug into, go to qualifiedtoworkwithbrian.com to see if you’re a good fit.
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