WealthStone 101 – Part 1: Tax Planning

Once you have an understanding of Building Blocks: People at Work and Money at Work, you are ready to move into Part 1: Tax Planning. Unfortunately, many people do not think about Tax Planning as an integral part of their financial picture. Taking the DIY approach to taxes is not always a bad thing, but a professional could help you understand and avoid unnecessary tax burdens.

Constant Change

The tax code is constantly changing and evolving. While the tax code changes at the end of 2017 were highly publicized, many people don’t realize that the tax code changes every single year. Sometimes the adjustments to the tax code are so subtle that they only affect particular taxpayers. Smart people with good intentions rely on the news or their tax preparer to bring relevant changes to their attention and advise if an action should be taken. And, unfortunately, sometimes those changes are overlooked.

From Basic to Complex

The most basic Tax Planning could involve gifting strategies, making sure that the appropriate withholdings are selected, and ensuring that all appropriate deductions are selected and reported. As net worth and complexity increases, Tax Planning begins to affect other areas of a person’s financial life like debt strategy, insurance planning and estate planning. The consequences of a misstep in planning can mean serious financial pain. You wouldn’t pay a bill that was mistakenly assigned to you, so why would you pay a government tax bill that you really should not owe? To potentially avoid that, engage a professional to think through those steps with you.