THE THREE PRIMARY GOALS OF TAX PLANNING

1. To assure that the client knows if, when, and how much to pay in estimated tax payments during the year so as to avoid any underpayment penalty and interest charges. Due dates for estimated tax payments can be found at our Tax Quik Guide, located within this Web Site.

2. To estimate the client's taxable income in order to estimate total tax liability for the year. Note: This amount may be considerably more than the amount that the client is required to pay in estimated payments during the year. For example, a client's estimated total tax liability might be $40,000 but he may only be required to pay $25,000 during the year to avoid underpayment penalties. Therefore, he can defer the remaining $15,000 tax liability until the tax deadline. This allows the client to keep that $15,000 under his direct control (e.g., to earn interest) until the final tax due date.

3. To find any legitimate tax strategy that would lessen the amount of tax owed.

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WHO SHOULD ENGAGE IN TAX PLANNING?

1. BUSINESS OWNERS: Whether you are a sole proprietor who files Schedule C, or a principal of a separate legal entity, your income will fluctuate from year to year. Therefore, it is important to look at your tax situation at least 2 - 3 times during each year.

2. OWNERS OF RENTAL PROPERTY: Rental income or loss may also fluctuate substantially due to such variables as repair bills, vacancies, etc. Further, if your income from all other sources exceeds certain limits, you could suddenly find yourself unable to deduct passive losses that you may have been able to deduct in the past.

See the section in this web site entitled Rental Property for additional information.

3. PARTICIPANTS IN REAL ESTATE TRANSACTIONS: Most taxpayers are no longer subject to tax on capital gains from the sale of a principal residence; however, there are specific conditions which must be met in order to qualify. You are subject, though, to tax on capital gains from the sale of rental property and other real estate. It is important to calculate your taxable gain at the time of the transaction. These gains can drastically alter your tax situation, and you need to identify this impact before year-end.

First-time homeowners should consult with us since a new ability to itemize deductions may allow them to lower the amount of tax withheld from their paychecks. New itemizers may also need to learn what additional records to keep so that they are better equipped at tax preparation time.

4. PARTICIPANTS IN STOCK TRANSACTIONS: Capital gains on stock sales may also seriously impact your tax situation. If you have been fortunate in the market, it is best to know ahead of time how much additional tax you will owe on April 15. If you have exercised stock options through your employer, tax planning becomes even more important.

Although taxes are generally withheld at the time of exercising a stock option, the dollar amounts are often quite large--thus increasing Adjusted Gross Income by a substantial amount. This may cause the loss of a large portion of itemized deductions, personal exemptions, and other benefits, which would otherwise have been available.

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WHAT SHOULD I DO ABOUT TAX PLANNING?

Phone our office manager at (703) 361-9068 and schedule a Tax Planning Appointment! Often, just one hour of our time will suffice for this purpose-certainly an hour well spent.

Prior to the meeting we'll send you a checklist of relevant documents. Please be sure to bring them along to your appointment.

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