Tax planning is defined as the process of analyzing your specific financial and tax scenarios to make decisions that minimize the amount of taxes that you must pay. This is not something that is done just before taxes are due. It’s a yearlong process that includes decisions related to various areas of your finances. This could include choosing the timing of specific expenditures, selecting investments and retirement plans with taxes in mind, and being aware of deductions and filing status. When done hand in hand with financial planning, it creates a well-rounded and effective financial strategy.
Professional tax planning should not be confused with tax evasion. When completed by a licensed professional, the process of tax planning is completely legal. It simply provides individuals and businesses with additional insight and counsel regarding their tax situation.
Think of it this way: If you found out that you could reduce your cable TV or phone bill without sacrificing service, wouldn’t you jump at the opportunity? Tax planning simply allows you to take advantage of opportunities that already exist without making drastic changes to your lifestyle or business strategy.