The tax code is now more than 74,000 pages long, according to CCH, a respected provider of software and information services to tax, accounting and audit professionals. That’s about 185 times longer than the 400-page code enacted when the IRS was founded in 1913. Add to that all the interpretations and judgments issued by tax courts through the years, and it is evident that any taxpayer needs a qualified team to make sense of it.
In past posts, we have pointed out that while tax-paying citizens are necessary to run a country, paying more than your share is not necessary. In our experience, though, people with sizeable incomes and profitable businesses still pay more than they need to, and far too often.
Every taxpayer needs to hear this critical message: The tax benefits buried in tax law are like gold nuggets or jewels hidden in the ground. If you know how to dig them up, there is real value there for the taking for the taxpayers who can qualify for them, sometimes amounting to tens of thousands of dollars annually. This is especially true if they run a business.
Let’s get back to my first point: You and your accountant cannot handle tax planning without a skilled code navigator. Act now to add to your advisory team a tax professional who is well-trained and familiar with those areas of law that offer you the greatest amount in tax benefit. Just two examples:
- Most sole proprietors miss out on at least $8,000 in tax savings annually. Why? Their accountants haven’t fully laid out how best to organize capital assets and expenses to maximize deductions, or how to minimize that self-employment tax bill that surprises so many independent business people each April.
- Hiring family members (as young as age 7) to handle administrative or other legitimate business tasks opens up income-shifting techniques which enable payment with tax-deductible dollars for items like your children’s tuition, or even extracurricular activities. The tax savings from these techniques can be used to pay for anything that benefits the child. One self-employed real estate broker, for example, used this planning approach to pay for her daughter’s wedding, writing off the entire amount as a legitimate tax deduction.
Act Now: Add a Tax Planner to Your Tax Advisory Team
Your talented accountant or CPA needs help saving you money. They do not have the time during tax season to do the research needed to identify those lawful tax-saving tactics that apply to your circumstances. They also work on a fee basis; they charge you by the hour for research they do.
A qualified tax planner, on the other hand, can already navigate to those areas of law that offer real tax savings; and the compensation is not an hourly fee, but “on success,” using a value-based pricing model. The tax professional first proves his or her worth by reviewing your most recently prepared tax returns to identify missed planning opportunities and taxes that you have already overpaid. After completing this complimentary analysis, he reports back to you:
- The pain of how much you have actually paid over the last few years in wasted taxes
- The gain that tax law says you are entitled to keep, but missed
- How much the tax planner’s fee will be to craft a formal Tax Reduction Plan to capture your missed gains
You can then weigh the benefits against the fee and decide if it is worthwhile for you to proceed. You only act if the amount you pay to the tax planner is a small portion of the thousands in tax rebates you could receive.
A good proactive tax planner needs only about a couple weeks to review your tax returns to identify those missed planning opportunities and taxes you are wastefully paying. With the first tax filing deadline fast approaching (earlier than April 15th for some businesses), time is now of the essence. It is a no-risk move to request a Second Opinion Tax Diagnosis of your tax returns.
Truly, the only thing you have to lose are the tax dollars that you really should not have paid!