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Tax Planning

Tax Planning Attorney Washington, D.C.

Tax planning is the process of evaluating a financial and lifestyle decision from a tax perspective to minimize tax liability through timing the use the deductions, credits, and exclusions. Tax planning needs to be accomplished in advance, as it asks the question of what can the taxpayer do proactively to save on taxes due next year. Also, asked from a different approach, what is the tax effect of completing a certain transaction. It is important for a tax advisor to educate clients on tax strategies on ways to save on taxes throughout the year.

Common Tax Savings Strategies:

Tax planning involves an analysis of business and personal transactions from a tax perspective, that are usually part of a much broader business strategy and lifestyle preference. Examples include evaluations of the timing of income and deductions, purchases and sales of assets, choice of business entity, residency and numerous other business and personal decisions. In my tax practice, taxpayers’ pose many ‘what if’ questions and they are best answered by running a formal tax plan and consultation session. Tax Planning Scenarios frequently analyze:

  • Buying a home, including an Investment Rental Property
  • Renting your personal residence, timing the Exclusion from Gain
  • Moving to or from a State, including steps to change Domicile
  • Setting up an LLC for my business, including the S-Corp Election
  • Business owner Compensation planning, Salary vs. owner Draw
  • Contributing to or taking a Distribution from Retirement Plans
  • Receiving or making a Gift, including foreign gift Disclosure
  • Moving and working overseas; Foreign Earned Income Exclusion
  • Filing jointly or separately with Spouse, including non-citizens
  • Itemizing tax deductions, including Charitable Contributions
  • Purchase a business vehicle, including accelerated Depreciation

Working with a Tax Planning Attorney:

The first step in working with a tax planner is identifying your specific goals and objectives. Upon researching the issues and crunching numbers, a good tax planner will not impose a course of action upon the taxpayer, rather communicate the benefits and risks associated with a decision, including the projected tax savings. Decisions are made solely by Client after careful evaluation and analysis of all relevant considerations, including those aside from taxes. The tax attorney’s role will be to determine the tax effect of a particular transaction, and to assist the taxpayer in weighing the pros and cons in deciding to partake or refrain from said transaction. It is key for the tax planner to remain independent as to the course of action as it is ultimately the taxpayer’s decision.

Implementing your Tax Plan:

Once the taxpayer has agreed on the tax savings strategy, after having fully evaluated the benefits and costs, it is then necessary to implement the tax plan. The devil is in the detail with tax planning as certain steps and actions will need to be precisely followed. Some steps will also need to be completed by a certain date or within a specific time frame. For example, if you are rolling over funds from a retirement plan, this will need to be done within 60 days. Similarly, if you elect s-corporation tax treatment for your LLC, this will need to be filed with the IRS by March 15th. It is imperative that the tax planner communicate the process and supervise completion of all steps in the process, until the plan is fully implemented. Also, the tax plan should be reviewed periodically to make sure it still makes sense if there is change in circumstance, including changes in tax laws.