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It's time to start thinking about tax planning

Have there been any big tax events in your life this year? Have you started/closed a business, sold an unusual amount of stock, taken distributions from your IRA…..? These and many other irregular situations could lead to some surprises at tax time. If you like to know what to expect when you file your tax return, then maybe now would be a good time to consider a tax plan.

Here are some benefits of tax planning

1. Control: If you know what the likely outcome of your tax return will be you have the power to change it. If your situation generates a refund, you can discuss strategies of paying less withholding or estimated tax to keep your money now instead of waiting for the refund check. Or if your situation produces a liability you will have options of making more estimated payments, or strategies such as HSA contributions, delaying sale of stock, etc. Either way, when you have an idea of what's going to happen you have the ability to change the ending.

2. Preparation: The feeling of powerlessness is an unfortunate side effect of bad surprises. Even if after having a tax plan completed and there is no changing the outcome you can still be prepared. How many times have you heard the phrase "if I had known…, I would have…" Knowing your tax situation gives you time to deal with it mentally, emotionally, and perhaps make the plans to deal with it financially.

3. Economy: Tax plans can save you money in the long run. Wondering whether you should sell stock this year or next? Or perhaps your solely owned company is thinking about buying a new piece of equipment. Tax plans are great vehicles for "what if" scenarios. Talking to your tax advisor before making big tax decisions and having a tax plan can save you money in terms of the timing of those decisions. Such as, earning more income at lower rates and brackets, or when other losses can be applied will save you more money in tax than doing so without considering the tax consequences.

Maya Angelou said "When you know better, you do better." Tax plans most likely won't give you a perfect picture of what your tax situation will be; its purpose is to be a tool that helps you make wise and informed decisions.

The best time for a tax plan is the fall, not so early that there may be too many variables that cannot be predicted, but not too late or there won't be anything you can do to affect the outcome. If you are interested in a tax plan, please consult your tax advisor.

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