If I asked you to write down a list of life’s major moments, what would make the list? Did marriage or the birth of your children make it? How about college graduation or your first-home purchase? Rightfully so, such events give cause for celebration and the gathering of friends and family. Often, however, another guest hears about the party. Welcome or not, the Taxman is coming.
The Taxman might act as a perfect gentleman by offering his congratulations, blending-in with other guests and bowing out just before the party is slated to end. Of course, the Taxman might also act like the person you could go the rest of your life without seeing, drink too much spiked punch and then refuse to leave.
The ability to foresee which Taxman will show up is not exactly straight-forward. Financial instruments are increasingly complex and overhauls always seem to need their own overhauling. Even the once simple tax return has evolved into a complex symphony full of movements. The problem is that the vast majority of us could not care less about a symphony, let alone its particular intricacies. There are thousands of pages of information dedicated to explaining IRS Form 1040, which is only two pages long!
What most people might not know is that they do have power to influence the Taxman’s actions. This is accomplished two ways – preparation and consideration.
Preparation is simply planning ahead. Whether you decide to research the issue yourself, consult with an accountant or hire an attorney, here is the key – be proactive, not reactive. Taxpayers are very good at finding ways at maximizing their lives. Taxpayers want to know how to maximize investments, income, lifestyles, etc. Sometimes, however, the taxpayer should be focused on minimizing as well. Specifically, his or her tax liability.
Consideration is the process of exploring one’s options when preparation alone is not enough. The IRS targets taxpayers for a host of reasons. The IRS, however, does not always target the right taxpayers. When this situation arises, consider hiring an attorney, accountant or enrolled agent to assist you in considering your options before deciding upon how to proceed.
If you are serious about controlling which Taxman comes to your party, just remember – preparation and consideration.