Core Service
Tax planning is deciding your tax bill ahead of time, on purpose.
Tax preparation is compiling the information and filing with the IRS. Tax planning is the act of being ahead of it: making the moves, with intention, that lower the tax you pay, and doing it before the year is over rather than finding out what happened in April.
In short
It's a component of Tax Advisory, the way financial planning is a component of the ongoing relationship. Tax Advisory is the management of your entire tax life. Tax planning is the thinking inside it: figuring out what your tax bill is going to be, figuring out what could change it within what you actually have available, and then doing those things.
What the moves look like
Tax planning is making moves. Moves with your investments, and where each one is held. Moves on paper, in how things are arranged on the return itself. The way you pay yourself, if you own a business. The timing of when you pay taxes and how you pay them: out of this account, that paycheck, or another one. Funding a retirement plan. Buying a piece of real estate. Investing in your business. Each of those changes the bill, and each one has a window in which it can be done.
For someone approaching retirement, the list has its own shape, and the biggest items on it are decisions with dates attached:
The window between the last paycheck and required distributions, when income is low and a Roth conversion moves money to the tax-free side at a price that never comes back. Which account holds which investment, so the growth lands where it's taxed least. Which account pays you first, because the order sets the bracket. The Medicare premium lines, which look back two years at your income. Giving, timed to the years it helps most. And, in this region, the state line, which runs through a lot of tax decisions.
The point is the lifetime total
The shift that most people haven't made is from lowering next year's tax bill to lowering the cumulative amount of tax they pay over their lifetime. Some tax can be eliminated. Most of it can be moved, from a year where it would cost you more to a year where it costs you less, and moved on purpose. That's what managing it ahead of time means.
Why it matters more as you have more
I often say that if you aren't doing tax planning, there's a decent chance you're tipping the IRS. That's a bold claim and I can't say for sure it's true of you. But it's common: as you accumulate more, the list of things that could lower your bill gets long, and none of them happen on their own. If you're the kind of person who arrives at tax time, hands everything to a preparer, and waits to hear whether you owe or get money back, you're finding out what your tax bill was. You should know it well ahead of time, and you should have as much control over it as the law allows.
How far to push it
My rule is that I push tax strategy as far as the law allows, and I plan every year as if it's going to be audited. Those two ideas belong together. One keeps the needle moving. The other keeps the defense in place, so nothing gets done that shouldn't be, and everything that is done can be shown.
How it happens here
The projection, the moves, and the timing get decided inside The Keystone Method, at the same table as the plan and the investments, because a tax move that ignores the portfolio or the cash flow is a bad move. Then the year is managed inside Tax Advisory: the executing, the withholdings and estimates, the projection updated as the year takes shape, the fall conversation while decisions are still open, and the return prepared at the end by the same people. Tax preparation is the last step of a year that was planned.
Before you decide
Questions people ask.
Bring the rest to the Explore Call.
Is tax planning the same as tax preparation?
No. Preparation compiles what already happened and files it. Planning decides, ahead of time, what will happen. You need both, and they're done here by the same people, but the planning is where the tax bill actually gets set.
Can I hire you just for tax planning?
Here, no. Tax planning is part of Tax Advisory, which follows The Keystone Method, because the tax moves depend on the plan and the investments being in the room.
Is this only for people in retirement?
No. Business owners have some of the largest moves available, in how they pay themselves and fund retirement plans. The retirement years just happen to be the stretch where the most rules change at once.
Isn't aggressive tax planning risky?
Pushing strategy as far as the law allows, while planning as if every year will be audited, is the opposite of risky. It means every position is one we can defend.
Tax advisory, tax planning implementation, and tax preparation are provided through Talley Tax, a separate business owned and operated by David Talley. Tax advice is given by Talley Tax. Talley Wealth and Talley Tax work in concert, and they are separate entities. Securities and advisory services are offered through Cambridge entities as described in the site footer; Talley Tax is not affiliated with Cambridge. Talley Wealth advisory services do not include tax preparation unless a separate Talley Tax relationship is established. About Tax Advisory.
The next conversation
What to gather before we talk
Last year's return, your most recent pay stubs or, for an owner, the business's year to date, and the most recent statement for each investment account. That's enough to project the year and see what's movable. The first step is an Explore Call.