The income tax system in the United States is a standard formula where you are taxed on every single dollar you earn from any source UNLESS there is a code section in the Internal Revenue Code (IRC) that allows certain transactions to be free of this income tax surcharge. As a taxpayer utilizes a particular code section, the income tax surcharge is eliminated from that transaction. Proper tax planning utilizes as many code sections as appropriate to lower the overall income tax liability, ideally to an optimum level for that taxpayer’s unique circumstances.

I often hear this phrase: “I have a great CPA and he/she saves me a lot in taxes.” However, people are often surprised at the amount of annual income tax savings that can be accomplished by a properly formulated tax plan.

Tax preparation is NOT the same as tax planning.

CPAs and other tax professionals are primarily trained in accounting and the preparation of financial reports such as tax returns and not tax mitigation as these are two very separate functions in wealth management. Tax preparation is essentially the archiving of past financial transactions and tax planning is the structure and execution of future transactions that are tax-favorable due to compliance with applicable IRC code sections. This requires considerable tax knowledge and strategy with a one-to-five-year time horizon