The Purpose Of Tax Planning

1
The Purpose Of Tax Planning
2

• The overall goal of planning your taxes is to
  arrange your financial affairs in such a way that
  your taxes are minimized. There are 3 basic ways
  in which to achieve this, with each method having
  some slight variations
• Reducing income
• Determining your taxes depends a lot upon your
  AGI or Adjusted Gross Income, and your tax rate
  and tax credits are also dependent upon it. AGI
  can even have an impact upon your financial life
  that isnt connected to taxes, such as banks,
  mortgage lenders and financial aid programs, who
  all ask for your details of your adjusted gross
  income.

3

• Simply because your AGI is so important, this may
  be the best place to start when thinking about
  planning for your taxes. What goes into your AGI
  the higher your overall income, the higher your
  adjusted gross income. The sole way to reduce
  your taxes is to reduce your income, and the best
  way to do this is to contribute money into a
  401(k) or some other such retirement plan at
  work. This will reduce your wages and lower your
  tax bill.
• You can also reduce your AGI through other
  adjustments to your income, which can include
  contributions to an IRA, student loan interest
  paid and alimony to name but a few.

4

• Increasing tax deductions
• Taxable income is basically what is left over
  after youve reduced your AGI with deductions and
  exemptions. Almost every individual can take a
  standard deduction, while some are permitted to
  itemize them. Itemized deductions can include
  expenses for things like health care, personal
  property taxes, state and local taxes, gifts to
  charity and investment related expenses to name
  but a few.
• Keeping track of your itemized expenses
  throughout the year can form part of an excellent
  tax planning strategy, and you can do so using a
  spreadsheet or personal finance program. This
  enables you to quickly compare these expenses
  with your standard deduction, and you should
  always take the higher of your standard deduction
  or your itemized deduction.

5

• Getting married or having children can increase
  your standard deduction.
• Taking full advantage of tax credits
• After your taxable income has been looked at in
  greater detail and adjusted, you can begin to
  focus your attention on whichever tax credits you
  may be able to avail. These reduce your taxes and
  can include tax credits for college expenses,
  retirement plans or for adopting children.
  Perhaps the most effective credits are for
  adoption and college expenses.
• Tax planning can seem complicated and while some
  business owners may figure it out and not feel
  the need to hire professional help, most feel it
  wise to do so since it ensures that everything
  will not only be filed correctly,

6

• but that it will be filed in a timely manner, as
  penalties for late filing can prove costly.
• At Heyer Associates, we proactively assist our
  individual and small business clients in meeting
  their goals. Our key area of focus is ensuring
  that our clients remain compliant with federal
  and state tax laws by providing them with high
  quality accounting and tax service Coral Gables.
  If you are looking for individual tax preparation
  in Miami , Heyer Associates would be a right
  option.