Often overlooked, proactive tax planning is one of the most valuable pieces of a complete financial plan. Tax planning consists of a review of your most recent tax return overlayed with your financial goals, current cash flow, and retirement plan to identify potential planning opportunities - both now and in the future – to optimize a strategy focused on keeping your lifetime tax liability as low as possible. This is different from tax preparation (usually performed by a paid-preparer, CPA, or an online service like TurboTax), which focuses on complying with required filings with a tendency to attempt reducing your current tax liability without consideration of the consequences of those moves in the future.

Taxes touch every part of your financial life. Your tax return is a financial fingerprint: it is unique to you, complete with valuable clues and information buried in dozens of pages of complex and hard-to-comprehend forms. Understanding your unique tax situation equips you, your tax advisor, and your financial planner to have more valuable and actionable conversations. Additionally, demystifying the world of income taxes can help you understand why integrating a robust tax planning process is an important part of your financial picture.

Everyone! Regardless of your income sources or amounts, anyone who pays income taxes can benefit from having a professional review of your tax return to identify relevant planning opportunities. At worst, you may conclude that you are currently maximizing every available tax saving opportunity, both today and in the future. That is great “peace of mind” news. Alternatively – and more frequently – you may identify a handful of saving opportunities in the current and future years.

Often, our team identifies that the conventional wisdom of deferring taxes as long as possible is not the most tax-efficient strategy for most families. Whether it is transitioning from living off income from employment to distributions from retirement accounts or the sale of a business, coordinating these decisions with other areas of your financial picture can significantly impact the after-tax value of your assets.

Several opportunities may be identified during a tax planning process, including topics like coordinating savings utilizing the most tax-efficient account types, present-day charitable giving strategies, leaving a legacy to your children, church or charities, targeted capital gain recognition, ROTH IRA conversions, tax credit eligibility, taxation of Social Security, and more.

While the subject matter is extraordinarily complex, we have various tools and a team of experts that can simplify and effectively communicate recommended strategies. We can model a variety of tax code environments to evaluate hundreds of different strategies to focus on creating the most efficient approach to your specific goals. We can run projections to see how potential changes (e.g., filing status, dependents, the sale of a business, stock option exercises, acceleration, or delay of income, etc.) may impact your tax liability today or in the future.

Thanks for taking a look.

Tim Jaynes