Income tax planning - Everybody needs it - individuals, partnerships, C corporations, S corporations, trusts, estates - Jon Andrews, CPA, P.C. can help you lessen your tax burden

Federal and state taxes will take almost 28% of the total income of the average American in 2004 according to the Tax Foundation. Their report for 2004 can be found here. According to Tax Foundation president Scott Hodge, "Despite the dramatically lower tax burden in 2004, Americans will still spend more on taxes than they spend on food, clothing and medical care combined. In 2004, Americans will work 65 days to afford their federal taxes and 36 more days to afford state and local taxes. Other categories of spending that require many days of labor to afford are housing and household operation (66 days), health and medical care (51 days), food (31 days), transportation (31 days), recreation (22 days), clothing and accessories (14 days), saving (5 days) and all other (44 days)."

For corporations, trusts, and estates, the income tax burden can be even higher than for individuals because of the much more compressed tax rate schedule.

Because income taxes take such a large portion of your income, planning to minimize the effect of the taxes is extremely important. Far too often, people wait until the end of the year, or after the end of the year, to try to reduce their tax bill. Income tax planning is best accomplished beginning early in the year and certainly before any significant or extraordinary transactions are completed.

The very best tax planning happens when tax savings is a "frame of mind" and you, and your tax advisor, stay current with the ever-changing tax laws and how they apply to your situation on an on-going basis.

On the following pages, we will explore some general tax planning ideas for individuals, C corporations, S corporations, partnerships, and trusts and estates. We will also look at some planning opportunities relating to divorce situations, like kind exchanges, retirement plans, and self-employment tax issues.

Keep in mind that the ideas presented are, by necessity, of a general nature. We would be happy to discuss how these, or other ideas, apply to your specific situation. Click here to send us an email.

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