Even though filing for the 2022 tax year will not happen for many months, planning for your filing now can provide you with ultimate tax savings when the time comes in 2023. Now is the time to review your financial wellness, assess your filing for 2021, and see how you may be able to improve and maximize more savings come tax time. Planning is a vital step within financial goal setting as it helps you prepare for now, then, and later.

Tax Planning is Proactive, Not Reactive

When it comes to tax savings, planning is of the essence. Waiting until tax time to implement significant changes that can provide extra savings will not maximize your savings potential. Planning in its nature, for all things in life, is proactive, not reactive. Strategy and implementation are critical parts of financial planning and can make all the difference in your overall tax savings.

Many tax-saving strategies can take multiple years to implement. One of which is a Roth IRA Conversion, which can provide lower tax rates to those who qualify. These kinds of advanced tax strategies take extensive planning and implementation before you can reap the rewards of the savings.

Take Small Steps Throughout the Tax Year

Rather than only focusing on tax savings during tax season, it is best to start working with a tax strategist who can give you steps to work out throughout the entire tax year. These smaller steps could include hiring your children for extra deductions. You could also track underutilized tax deductions, such as healthcare, the home office, or auto expenses. These smaller steps taken throughout the entire tax year are how you will rack up the most savings possible when filing taxes during tax time.

If you are a business owner, you can also work with a financial advisor when selecting a business entity. Your business’ classification status (whether it is a corporation, limited liability company, or sole proprietorship) matters significantly for your tax savings. Working with an experienced tax advisor on an entity analysis can be a big step to maximizing your tax savings this year.

Tax Planning is a Life-Long Process

There is more to consider than just this year’s tax savings when financial planning. Plan for the short-term, mid-term, and long-term for your personal and business financial goals. Concentrate on the following types of financial planning:

  • Short-Term: Current year planning: Each year should have its unique objectives, especially since tax laws and standards are ever-changing. Consistent work with a tax planner can help you maximize your tax savings year after year, regardless of new rules and regulations enacted throughout the time.
  • Mid-Term: Retirement planning: Building a robust retirement fund involves a lot of planning and preparation, whether retirement is right around the corner or many years away. It’s vital to have a strategy that allows you to live the lifestyle you desire now while also ensuring you’ll have the money to do so when you retire.
  • Long-Term: Succession planning: Your personnel and business demands will evolve, and developing future leaders at all levels of the business can help you and others transition smoothly in the future. You may not be able to foresee when a key person will leave, but you can begin planning for succession now to ensure your team’s success.
  • Long-Term: Estate planning: It is never easy to consider where our life savings, assets, and heirlooms will go after we pass away, but it’s a necessary step toward ensuring they go to the people you want them to. The crucial thing to remember is that as your family dynamics change or new family members join your family, your will and estate plan can always change.

How to Jumpstart 2022 Tax Planning

TSP Family Office has the experience, professionalism, and solutions to help you keep more of what you earn—whether you’re new to tax preparation or looking for a team of financial advisors and tax strategists. To get a head start on your potential tax savings, use our Tax Savings Calculator.

Bottom line: When it comes to your income, tax savings, or estate planning, planning is vital to ensure you achieve your goals. Give TSP Family Office a call today to see how we can assist you with tax planning strategies for 2022.