With the tax deadline fast approaching, you’re wondering what the results might be. Will you owe? Will you be getting a refund?*
Wouldn’t it be nice if you knew ahead of time?
Is there really anything you can do about the outcome?
Well, the short answer, unfortunately, is no. (Keep reading to learn about exceptions.) To understand why, you need to know the difference between tax preparation and tax planning.
tax preparation vs. tax planning
Tax preparation is what happens after the tax year is over. The traditional accountant records historical information about a person and their finances and applies the relevant tax law.
Tax planning happens before the tax year is over, perhaps even years in advance. In addition to understanding your circumstances and how tax law applies, it takes someone who is forward-looking and who is able to see many possibilities. Then, with the right advice, you can take action to shape your personal circumstances and finances in a way that will legally minimize your tax liability.†
That’s how we’re different. At Key Insight Advisory, we are focused on proactive advice. So much so that we only do tax preparation for clients for whom we’ve done a tax plan.
We still have a few openings before the current deadline to start your tax plan for 2022 and beyond. And once that’s underway, we can prepare your 2021 tax return as well.
Exceptions to change your outcome now
So, what about the exceptions, the things that you can do now to affect the outcome of your tax return? Yes, there are a few things that can be done. For example, you can still make contributions to certain tax-advantaged accounts, you can plan the timing of your depreciation deductions, and you can amend a prior return such that it advantages future years.
Topics of our future insights:
*Why asking if you will be getting a tax refund is the wrong question.
†Why minimizing you tax liability is the wrong goal.