What is tax planning?

What is tax planning?

Tax planning is the method of organizing and planning your financial affairs so that your tax liability is as low as possible.

What are the goals of tax planning strategies?

The goals of tax planning strategies are to:

1. reduce tax liabilities (Pay now)

    

2. defer tax liabilities (Pay later)

    

3. eliminate tax liabilities (Pay Never)

However the first goal of tax planning is to reduce the amount of taxes owed to the IRS whether you are paying the taxes now, later or never. There are many tax planning strategies to lower your taxes the legal ways. However there are also many illegal tax planning strategies. Estate planning strategies are tax planning strategies.

There are many tools for tax planning such as the use of trusts, LLCs and family limited partnerships. Many legal structures can actually shield the owners or beneficiaries from having to pay taxes.