International Business

If you have ever endured a dose of ‘Sour Surprises’ from Uncle Sam on April 15, then you already know that smart, strategic tax planning throughout the year is the only way to keep tax headaches away. One small mistake like a missed payment, illegal deduction of expenses or incomplete records is enough to attract a host of penalties; and you can be sure that no tax auditor will take kindly to lame pleas of ignorance.

Income tax planning basically refers to examining how to conduct your business in such a way as to eliminate or reduce taxes. As a business owner or individual, you have several methods in which to conduct business; effective tax planning focuses on the method that facilitates the lowest tax liability, legally.

There are many tax planning strategies at your disposal. Whichever you use, you will basically be targeting any or all of these results:

Ø Reducing your taxable income

Ø Claiming tax credits, if any

Ø Managing and controlling the time in which to pay tax

Ø Avoiding costly tax planning mistakes

There are two ways in which you can manage your financial planning: do it yourself or employ the services of an accountant or a professional adviser.

Doing your own tax planning is one of the best ways to learn about tax planning. However, keeping abreast of the latest rules and amendments in income tax can be quite daunting for the average individual. Amendments, rules and explanations run up to approximately 42,000 pages in standard publications, making the tax code in the US particularly complicated. For most people, reading up on tax literature is probably as painful as a bug in the ear. Which is why most companies and individuals turn to specialist tax planners.

Specialist tax planning companies assist companies and individuals examine the cornucopia of tax issues facing them. They mitigate risks and advise companies and individuals with high net worth on ways to reduce the amount they pay as taxes every year. They recommend appropriate solutions to knotty problems and work to increase the value of a company’s assets.

Whether you employ a personal accountant or use the services of a tax planning firm, you still need to have some basic knowledge of income tax planning. For example, you need to know what kind of records to save throughout the year, how to prepare your tax returns, how to substantiate the information you have provided in your forms, so on and so forth. This you can gain through practice and of course, in consultation with your tax planning service provider.

It is important to understand that while you cannot do anything to literally lower your tax rate, you can take certain actions that will reduce the tax figure you attract. Spotting that course of action and following it up will not just push up your bottom line, it will also help you cruise through mid April blues with a smile!

At Sovereign Group, our main business has been the setting up and management of onshore and offshore companies and trusts to assist with income tax planning - and asset protection including asset management services & protection, capital fund raising, specialized tax advice, credit cards and others.

Article Source: ArticlesBase.com - Income Tax Planning