Most people think about income taxes when they gather their information and take it a tax preparer to meet the April 15th deadline. This is reactive tax planning. All that the preparer can do is prepare the return correctly and determine how much you owe. This strategy can cause more of your Social Security to be taxed, cause Medicare premiums to be higher, hurt your surviving spouse and cause your marginal tax rate to be higher. Often people with this strategy delay starting qualified income from 401k, IRAs and TSAs. The old train of thought was to not pay taxes any sooner than necessary, but in the end, this can be an expensive mistake.
A better strategy could be to be pro-active with your tax planning. Your goal should be to pay as little income taxes as legally required and leave the most possible money to your family. It is important to remember that all money is not taxed the same. To achieve the best results, you have a plan early in your financial life such as what kind of accounts to save in and even decisions such as when to start taking Social Security benefits. Many different factors determine how much you must pay in taxes.
To manage this situation, we have worked with a Professor of Taxation at one of America’s leading universities. The outcome of this work was the creation of the Tax Management Journey. This serves as our process to pro-actively manage taxes. The seven steps serve as a foundation to reduce your lifetime tax bill. It is supplement with additional strategies to meet your family’s unique needs. This process considers the different tax rates of different types of money and works in a comprehensive way to reduce your total taxes due.