Your Tax Strategy Questions Answered
Your Tax Strategy Questions Answered
Last week I shared that if you do not have a tax strategy yet, then you definitely want to get your tax strategy done before you file your tax return.I also shared that a strategy is a step-by-step action plan that ensures you are paying the least amount of tax allowable by law, regardless of your business or investment situation.I received questions from many of you asking me to explain the idea of a tax strategy even further. In fact, there were so many requests for the answers to these questions that I decided to share the answers here.Your Tax Strategy Questions AnsweredHow do I know if I really need a tax strategy?If you are an investor or if you own a business, then you absolutely need a tax strategy. The tax law is designed to benefit investors and business owners. A strategy is designed so you know exactly what you need to do to maximize these benefits.Many of you are in the position of thinking about starting a particular investment strategy or a business and you just aren't sure if you should do your tax strategy before or after you start your investing or business.I always recommend getting your strategy done BEFORE you start your investing or business because then the foundation can be in place and ready for your new venture. Plus, in most cases, it is possible to keep the foundation flexible enough so if your venture takes you in a different direction, your strategy can adapt to these changes.Best of all, by doing your strategy before, you can get a jump start on the rules you need to know as an investor or business owner to legally maximize your tax savings. This is one area that most people neglect to focus on early and by the time they do focus on it, it is a huge project that requires a ton of catch up. In fact, most people in this situation never get caught up. As a result, they aren't able to maximize their tax savings.How long does it take to create a tax strategy?At ProVision, we have developed a system that makes creating your tax strategy a very efficient process. Your tax strategy can be completed in just one month.How long does it take to get my tax savings in my pocket?In many cases, ProVision clients are able to reduce their current tax payments, whether it is by reducing their withholding or reducing their estimated tax payments, so they can put some, if not all, of their tax savings in their pockets immediately.How can I prepare to create a tax strategy?A tax strategy is comprehensive. Here are the key questions to answer to prepare to create your tax strategy:What is your wealth vision?Visualize yourself 5 to 10 years down the road. Where are you with your wealth? What are you doing? How has your family changed? Do you own a business? Do you have investments?Knowing where you want to be is the first step of your tax strategy. Your goals for your family, wealth, retirement, asset protection, charities and future generations all impact your tax strategy, particularly how much flexibility is needed so your tax strategy still meets your needs as you attain your goals.Where are you today?Where are you today with your business and investments?What is your current income?What are your current expenses?Clearly identifying your starting point provides key information that is needed to create an action plan to make your tax strategy a reality.Some people find it strange that I approach a tax strategy with a thorough examination of where you are today and where you want to be. They wonder what this has to do with saving taxes.These two points play a key role. Once you know where you are today and where you want to be, you can begin to apply tax saving concepts to your specific situation. Where you are today helps to identify what you need in your tax strategy today to maximize your tax benefits. Knowing where you want to be helps to identify your future tax benefits which helps identify the degree of flexibility that is needed in order to get you to that point.Do I need a tax strategy AND a wealth strategy?Your tax strategy is part of your wealth strategy. One of the fastest ways to put cash in your pocket is to reduce your taxes. Leveraging the tax savings from your tax strategy is a powerful way to supercharge your wealth strategy.
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