What is tax planning?
Jun 26, 2007 (Weekly Tax Bulletin – ABIX via COMTEX) — Tax planning, which is completely different from tax evasion, is not something that should be done just at tax time. It is a strategy that needs to be considered at all times during the year, and essentially involves the arrangement of a taxpayer’s affairs so that their liability to pay income and other forms of tax is minimised.
Tax planning is a broad term that is used to describe the processes utilized by individuals and businesses to pay the taxes due to local, state, and federal tax agencies. The process includes such elements as managing tax implications, understanding what type of expenses are tax deductible under current regulations, and in general planning for taxes in a manner that ensures the amount of tax due will be paid in a timely manner. One of the main focuses of tax planning is to apply current tax laws to the revenue that is received during a given tax period. The revenue may come from any revenue producing mechanism that is currently in operation for the entity concerned. For individuals, this can mean income sources such as interest accrued on bank accounts, salaries, wages and tips, bonuses, investment profits, and other sources of income as currently defined by law. Businesses will consider revenue generated from sales to customers, stock and bond issues, interest bearing bank accounts, a
Professional tax planning or tax avoidance involves minimising or deferring the amount of taxation paid in a legally compliant way. It involves making a series of fundamental changes to the way a family uses and receives their money. It must be distinguished from tax evasion as this can result in serious legal consequences, such as imprisonment.
