Individual And Business Tax Planning
Much tax planning for individuals happens on April 15th of the following year. The problem with this method is that many opportunities to reduce taxes closed with the end of the previous year. By that time, the transactions have already occurred and the taxpayer has very little opportunity short of fraud to recast them. For example, a business expense, and especially an investment expense can have very different consequences if made on Jan 2nd as opposed to December 30th of the previous year. Factors such as differing marginal tax rates from year to year, temporary tax incentives in the code, and other expenses incurred during the year all shape the decision about when transactions should be made and how they should be structured.
The reality is, many people can miss hidden opportunities for significant tax savings. For example, if a taxpayer incurs a $100,000 expense on December 30th of a year in which they are in the 25% tax bracket instead of waiting until Jan 2nd of the next year, when they will be in the 35% tax bracket, they will implicitly pay $10,000 more for the asset in total when tax is considered. Call Insight Law and let us monitor your ever changing tax picture. By the time April 15th comes around, the transactions have already happened and must be merely categorized correctly.