Pay Less in Taxes – Six Things a Tax Advisor Does
Several years ago, I was reviewing a tax return with a wonderful woman in her 70’s – I’ll call her Sally – who had come to get her taxes done. Every year, she had always had to pay taxes due to her combined investment income and her social security. There was very little we could do to reduce her taxes for that year based on the information she had brought us. All of the deduction had been taken, all of the credits found, the tax return was all it could be. But she was still paying over $6,500 to the IRS every year!
But what if there was a way to do Tax Planning, what if there was a Tax Advisor who could look into the future and help strategize on how to reduce next year’s tax bill, and the year after that. Let’s look five or ten years down the road and understand the total impact of the investments and the income streams to optimize the amount you are paying each year to keep Uncle Sam happy. You need to engineer a plan that really benefits your situation that puts you in control.
Our dear friend Sally: well the following year she came in to do her taxes again. By this time we had implemented a plan that gave her more income, yet now she only paid $500 to the IRS. Together we had reengineered her retirement plan and been able to save about $6,000 per year. And those savings have been there every year since and will be into the future.
- Not using tax deferred investments effectively to hide certain investments
- Reorganizing investments to stop paying taxes on Social Security
- Not using tax efficient and tax free investments (there are three investment classes that are tax free!)
- Not planning for the increases in Required Minimum Distributions for your IRAs
- Not optimizing your deductions year to year
- Not planning to use capital gains exclusions when you can
In the world of Financial Advisors there is almost always a disclosure – “Consult your Tax Advisor to see if this is right for you”. But who is that person, where do you find one. In the world of tax preparers and even most CPA’s, there tax advice consists of looking at the information you brought for last year and optimizing that. They are historians trying to find the best approach to paint history.
Find a forward looking Tax Advisor who uses Tax Planning software to create various scenarios, and evaluate the ideas that could save you significant tax payments to the IRS, now and in the future. Engineer Your Retirement so that it Works.