Albert Einstein is quoted as saying, “The hardest thing in the world to understand is the income tax.” And this guy is a world-renowned physicist!
I am thinking he probably hired a good accountant to help him navigate through the process of preparing and filing his taxes since he was a little busy with his work in physics. That’s smart. But I wonder if he ever did any tax PLANNING? That is actually the precursor to tax filing and is
So what exactly is tax planning? Investopedia defines tax planning as “the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan working together in the most tax-efficient manner possible.”
So what does that mean for you and me? Well, tax planning is the practice of taking a look at income, assets and liabilities and handling them in such a way as to not only minimize taxes now, but also for the future. This is actually a proactive way of dealing with your tax liability instead of the reactive method of just getting your taxes done at the end of the year and hoping everything will all be alright. With tax planning in place, momentum is not hindered in the event money is owed to the IRS.
The Private Practice Millionaire planned for this and is ready. They know the importance of tax planning and coordinate with their accountant and their financial planner throughout the year to make sure they are managing their income, expenses and assets properly to insure they are being tax efficient. They have a financial plan and they follow it and they endeavor to stay educated so that tax planning concepts are known and understood.
Are you a Private Practice Millionaire?