Most taxpayers meet the tax code once a year, in early spring, when their return is due. The work at that point is preparation. The numbers are already there. The decisions have already been made. The preparer arranges the facts on the right forms and submits the return.
Tax planning is the work that happens before the year closes. It looks at the facts as they are forming and considers whether the structure, the timing, and the elections that produced them are the ones the taxpayer would choose if they were starting fresh.
The difference is the position behind the return. A return is a receipt for the year. A plan is the year itself.
Tax planning does not invent deductions or hide income. It deploys the strategies the Internal Revenue Code already permits, in the order and combination that fits the taxpayer facts and circumstances.
Cash balance plans, cost segregation studies, entity optimization, income shifting, the §1202 exclusion on qualified small business stock, §1244 ordinary-loss treatment, §83(b) elections on restricted equity, and charitable-trust structures are eight families of legal strategies the code provides. Knowing which apply, and when, is the work.
A good plan is not flashy. It is deliberate. It pays the lowest amount of tax legally available and arranges the next year so the same is true again.
Next step
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