Episode 42: In this episode, Timalyn speaks to individuals and business owners. Tax debt can be a serious issue, both financially and emotionally. When it comes to taxes, you need to have a plan. Failing to plan is planning to fail. But, what is tax planning?
What Does Failing to Plan Look Like with Taxes?
Assume last year you didn't like your tax bill. It is now November and you are just beginning to think about your taxes, you didn't really have a plan for 2023. You should have been developing tax reduction strategies and implementing them much earlier. Timalyn recommends looking at tax reduction strategies before the year even starts.
Another way people fail to plan for taxes is by not seeking out the advice and guidance of an expert in their industry. If you have a retail business you don't need a tax professional who focuses primarily on the transportation industry. If you have real estate properties, it would be better to work with a tax professional who understands real estate investing.
Tax law has different ways of applying tax credits and deductions for different tax industries. You need a specialist who understands the nuances of your specific industry segment.
Don't Rely only on the Internet for Tax Planning Advice
Assume you Googled "Tax Planning" or some other phrase and found Timalyn. Not every piece of advice applies to your particular situation. Rather, treat that information as a starting point. Dig deeper for a tax expert who is closely aligned with your type of business. Tax strategies are not universally or equally effective for everyone.
Developing an Effective Tax Plan
An efficient tax plan will involve tax strategies customized to fit your lifestyle, your goals and focused on reducing your tax liability over time. There's no one-size-fits-all strategy.
Roth IRA vs. Traditional IRA
For instance, a Roth IRA is a popular savings tool. Contributions to a Roth IRA are paid with after-tax dollars. They will not reduce your tax liability in the current year. The good news is that the dollars you put in, and the interest that accumulates, won't be taxed when you pull them out. Now, a traditional IRA is paid with pre-tax dollars, which would reduce your current year's tax liability. The down side is that you'll eventually pay taxes on the money when you pull it out, years from now.
Are you making more money now, during your working years, than you will be in your retirement years? It might not make sense for you to invest in a Roth IRA instead of a traditional IRA, depending upon your specific situation and your specific goals. This is especially true if you are concerned with reducing your tax liability during those earning years. This is why it makes sense to work with a tax planner as well as a financial advisor when planning your retirement.
Should I Hire My Minor Child to Work in My Business?
This will probably be a separate episode in 2024. If you're interested in learning more about this option, subscribe to Timalyn's blog, Tax Tips with Timalyn.
Does Your Tax Professional Give You This Type of Advice?
Before you get upset with your tax professional, ask yourself, "Have I asked for tax strategies or have I asked for a tax plan?" You may not realize it, but tax planning is a different service. It's generally not included with tax preparation service. It's an investment in your future.
Many tax professionals assume you already know there's a difference between tax preparation and tax planning. If you need the latter, ask your tax professional if they provide that service and if it's something you can invest in to lower your tax liability. If not, they may be able to refer you to someone or maybe it's time for you to spend time looking for a tax planning professional. As a starting point, check out Tax Relief with Timalyn Bowens episode 16 , How to Choose a Tax Professional.
Invest in Your Future
Spending money to hire an experienced tax planning professional will usually save you money. It'll also give you some control over your tax bill and tax liability.
You tax bill is what you owe after everything you've already paid in during the year. While everyone has a tax liability, if you've properly implemented an efficient tax plan, you may be able to avoid a tax bill. Timalyn is going to go into more detail about this on her YouTube channel, in the upcoming weeks. Be sure to subscribe to it, so you'll know when that information is published.
Please consider sharing this episode with your friends and family. This information may be helpful to someone who really needs it. After all, back taxes shouldn't ruin their life either.
As we conclude Episode 42, we encourage you to connect with Timalyn on social media. You'll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.
Remember, Timalyn Bowens is America's Favorite EA and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .
f you have any feedback, or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact.
Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
