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Tax Planning vs. Tax Preparation

Updated: Mar 29

As a tax strategist, I’ve seen a lot of confusion over the difference between tax planning vs tax preparation. Over the years, I’ve heard it all: What’s the difference between a tax planner and a tax strategist? Is it better to have a tax planner or a tax preparer? Do I really need BOTH?


Here’s the thing: you might think you can save money by just going with one or the other, but you really can’t afford to skip out on a strong tax strategy.


Tax Preparation

Tax preparation is a retroactive process. It looks back at what happened over the last year, what your numbers are, and the amount you owe. A tax preparer gathers and organizes your tax information in the way the IRS wants it and ensures your return is accurate.


A tax preparer doesn’t do anything on the planning side. They look at the here and now. You talk to them once a year, and they are likely taking around a minimum of 20 hours of continuing education hours every year at best.


Tax Planning

Tax planning, on the other hand, is proactive and looks ahead. It looks at opportunities in the short term and long term to reduce your tax bill.


Not all tax professionals are tax planners. A tax planner will utilize many different strategies to minimize your liability while taking full advantage of the tax laws. As a general rule, tax planners tend to spend more time on continuing education to stay up to date with the changing tax laws and new strategies.


Think about it this way: if someone tells you to do something, you begrudgingly do it. Anyone who has kids will understand this 😉). You instantly don’t want to do it because you’re being forced to do it. And that’s what tax return preparation and filling is – the government tells you that you have to do it.


The government does not, on the other hand, require you to do tax planning and save your money. But who doesn’t want to keep more of their money?!


Tax planning is a key step in building wealth that many business owners miss. They think about filing their tax returns, of course; but they don’t think about the future, and the tax implications of making more money.


Huge Savings from Tax Planning

As you consider tax planning vs. tax preparation, you’ll want to consider the amount of money you could possibly save by implementing a strong tax strategy.


Exactly how much you can save is different for every individual, based on your business, the current tax laws, and the expertise of your tax planner.


But as examples, here are things my clients have been able to do through tax planning:

  • pay off their mortgage on their home

  • fully fund their children’s education savings plans and prepare for college (times 3 kids!)

  • reinvestment their savings back into their business and tripled their income in the next year

I love looking at how much money my clients can save this year… but also 5 years from now, and 10 years from now.


And that’s what gets me excited as a tax planner.


Do I need a tax planner?

You definitely don’t HAVE to have a tax planner. But why wouldn’t you want to save your hard earned money?!


Tax planners will identify deductions you might not be aware of, and suggest investments that could pay off big time in the future. That could mean huge savings for your business.


My tax practice focuses on this, and that’s what lights me up – because I’ve had clients who have saved life-changing amounts of money on their tax bills through strong tax planning.


I help my clients get the most bang for their buck and look at the entire financial picture holistically. We work throughout the entire year to balance the short-term savings with the long-term savings, the cash flows, and find the most strategic plan for taxes. It’s not just about having accurate tax returns, which is of course important… but there’s more to it than just that. It’s a key piece that many business owners miss towards building their wealth.


Interested in seeing how our firm can help?



*Disclaimer: This article is not meant to be tax advice. This is not an all-inclusive list of business deductions. Different rules may apply to each individual taxpayer’s specific situation. Please consult with your accountant.


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