Why You Should Plan Ahead To 2023 Right Now
Now that you have filed your 2021 tax return , you might be thinking that your tax work is done . Historically speaking , it is . But if you want to capitalize on opportunities for tax savings for 2022 and into 2023 , now is the best time to work on your tax strategies . That ’ s right . To capitalize on tax savings strategies for 2022 and beyond , you must proactively plan now .
This may seem contrary to what you just did : compiled tax documents and receipts to determine your taxable income for 2021 . But filing a personal tax return is a recording of past information , essentially reacting to what happened in 2021 . To implement tax savings strategies requires proactive ( not reactive ), forward-looking , history recording . This is where a tax strategist comes into play .
TAX PREPARER VS . TAX STRATEGIST
The person who prepares your tax return may or may not be able to assist you with tax planning strategies . That is because not all tax professionals , CPAs , and accountants advise on tax planning strategies . Many are solely focused on tax filing compliance . And in most circumstances , even if your tax preparer is also a tax strategist , this is a separate planning appointment from your tax filing meeting .
With over 70,000 pages in the very complex United States tax code , and with revisions and legislation occurring all the time , you need a tax strategist whose business it is to understand the code . And not only understand it but also know how to implement it to work for you and your specific circumstances . This deep digging into the tax code to find present and future tax savings requires a concerted planning effort by both the taxpayer and the tax strategist .
ESTABLISH YOUR TEAM
The more complex your finances , the more players you will likely need on your team . While some of these team players may wear multiple hats , here are a list of key players that we recommend for your entire financial coaching staff :
• Tax Advisor – Preparer , Strategist
• Attorney – General , Estate Planning , Asset Protection
• Bank Professional – Personal Banker , Loan Officer , Loan Strategist
• Insurance Professional – Strategist , Agent , Benefits Coordinator
• Investment Advisor
• Financial Google
PURPOSE OF TAX PLANNING
You should engage in tax planning if any of the following apply to you :
• You think taxes will be higher in the future
• You have excess room inside your tax bracket
• You can benefit from greater deductions today
• You are concerned about legacy planning for your surviving spouse
EXPECTATION FOR YOUR TAX STRATEGY MEETING
When meeting with your tax strategist , one of the first steps will be to delve deeper into your goals and plans for the future . Gaining an understanding of your whole financial picture provides the tax strategist with opportunities for planning to maximize the tax code and minimize your taxable income .
At Carson Wealth , we use a 75-point checklist to identify areas where potential tax strategies can be beneficial . To give you a glimpse , we ’ ve provided an overview of five tax strategies ( of course , there are many more strategies as well as various options within each strategy ).
POTENTIAL STRATEGIES
1 . Measuring Your Bracket – This entails determining which tax bracket you are in based on your taxable income and marital status . Income fluctuations as well as IRS-imposed tax bracket adjustments can affect where you land each year .
2 . Avoiding Marginal Tax Traps – Essentially , you should know how much room you have until you hit the next tax bracket . This is essential so that if a lump sum of money is received , it does not unknowingly catapult you into the next tax bracket which ultimately devalues that lump sum .
3 . Tax Sensitive Asset Allocations – You should evaluate owning assets in the right tax funnel at the right times in your life . This is when you consider whether your assets are “ tax deferred ,” “ taxable ,” or “ tax free .” Examples of “ tax deferred ” assets include 401 ( k ) plans , IRAs , and pension plans . “ Taxable ” income includes bank accounts , brokerage accounts , and real estate . “ Tax free ” assets include ROTH IRAs , FSAs , HSAs , and cash value life insurance .
4 . Gifting – If you do not need the money , you can gift it . By gifting , you reduce your adjusted gross income , thereby reducing your taxable income and , hence , reducing your tax obligation . This is much more financially advantageous than itemizing on your tax return and taking the charitable contribution . There are various gifting options available : A . QCD - Eliminate tax on your RMD by paying it directly to a charity . B . Donor Advised Funds – This provides for an immediate tax deduction , and you can gift it later . C . Gifting Down – Push income to your children ( who may be subject to the kiddie tax ). D . Gifting Up – Push appreciated assets or stocks to adult or elderly family members who will inherit them back with a stepped-up basis .
This piece is not intended to provide specific legal , tax , or other professional advice . For a comprehensive review of your personal situation , always consult with a tax or legal advisor .
5 . Pay Now vs Pay Later – From a farming perspective , the question is , do you want to pay tax on the seed and enjoy the harvest ? Or would you prefer to not pay tax on the seed and pay tax on the harvest ? From another perspective , do you think your taxes will increase or decrease in the future ? You may believe that when you retire , you will be earning less money , but although your income may decrease in later years in life , tax rates and tax brackets historically increase . This is just a snippet of a few strategies . There is no one single strategy that solves all issues . It is the implementation of multiple strategies and maneuvers that can reduce your taxable income , which decreases taxes paid and ultimately increases your financial position over time .
In addition , a tax plan is not a one-time event . It should be re-evaluated annually or when you experience a major financial transaction .
The old adage holds true : failing to plan is planning to fail . Therefore , it is essential to build your team of key players and engage in a tax planning meeting with your tax strategist so that you can start preserving all that you have worked so hard to achieve .
When planning for your future , there are so many considerations that it can feel overwhelming . At Carson Wealth , we work with you as your team captain to make the complex simple .
John Saunders What sets John apart is his thorough understanding of tax implications from financial transactions . After serving in the US Air Force , he began both his tax industry and wealth management careers . John ’ s focus has been to help clients find ways to minimize their taxes . His expertise has since expanded into all areas of wealth planning . John brings extensive investment experience uniquely coupled with a thorough understanding of tax ramifications to his position as a Managing Partner of the firm . Having owned his own tax and accounting practice for 28 years as well as financial practice , he understands the complexity of running a business and the importance of financial planning .
John continues to maintain his Enrolled Agent status with the IRS , equipping him with everchanging tax knowledge .
When not in the office , you can find him with his wife , Stephanne , and their two sons , Nathan and Logan . They recently traded in their camper for a pontoon boat and look forward to spending warm days on the lake . Together they also enjoy church , kayaking , hunting , fishing , and watching movies and sports .
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