Tax planning is the art of arranging one’s affairs in ways that limit or avoid taxes.  Commonly referred to as tax avoidance. It is also a tool used by small business owners, contractors, or anyone required to make estimated tax payments.  An effective tax planning strategy aims to avoid problems with the IRS and California tax authorities while saving on taxes, penalties, and interest.

Scenario Tax Returns

Creating a scenario-based tax return is a useful tool in understanding the tax implications of one or more events.  The complexity of an income tax return, with all its moving parts, can result in some areas being considered while other areas neglected.  This process avoids those errors by taking all those moving parts into consideration and providing the results of that scenario on actual tax forms.  

This tool is useful when considering to amend a past year return, estimating taxes for the current year, or for decision-making in future tax years.  

Estimated Tax: Quarterly

Estimated tax payments are required for business owners and contractors.  They can also be required for anyone with more than one source of income. Paying the correct amount of estimated taxes by the deadline will avoid penalties, interest, and other tax problems.

Estimated Tax: One-time

Unexpected or one-time events happen in life and some of them have significant tax implications.  These events may include selling a home, selling stock, receiving an inheritance, or withdrawing from a retirement account.  When taxes are due resulting from such an event, an estimated tax payment may be required.   

Tax Research

When it comes to taxation, common knowledge is rarely, if ever, reliable.  This stems from how tax laws change year-after-year, how the interpretation of those laws evolve, and how those laws apply to an individual’s specific situation.