1. Be aware of the different types of taxes Many people are not aware of the different types of tax systems that we have. Listed are the most common systems that may affect you. - Income: Federal, State and Local - Real estate tax - Tax on Investments: Dividends, interest, capital gain, and passive income on stocks, bonds, mutual funds, investment real estate, savings accounts - Estate or Inheritance Tax: Federal and state tax due on the estate or the inheritor - Gift tax: tax on giver of large gifts - Entitlement Tax: Social Security and Medicare (FICA), Federal Unemployment (FUTA) - Self Employment and Business taxation - Sales tax 2. Consider working with a Qualified Tax Professional Tax planning can be complex for many people. This is due to the complexity of our many tax systems and your personal and business circumstances. I highly recommend working with a trusted professional tax advisor. Tax advisors not only prepare your taxes but can help make decisions that will affect your future. They can serve as advisors for a whole host of matters and they can represent you if you face the dreaded audit. Consider the following when selecting a tax professional: - Local: Someone that you can easily meet with face to face - Personable: Someone that you can interact with and who cares about you - Proactive: Some tax preparers simply look at your previous year’s return and plug your current numbers into last year’s format. This of course assumes that last year’s preparer knew what he/she was doing. Try to find a preparer who knows your situation. A proactive professional will ask questions that will help you anticipate changes in your tax situation to help you properly plan in advance - Reputable: Find a professional with a good reputation. Ask people you admire for a referral. - Skilled: Look for an accountant that is very competent. A degree in accounting or law is very difficult to obtain. Designations such as CPA (certified public accountant), EA (enrolled agent) and LLM (master’s degree in tax law) are not prerequisites but may be helpful. Fees: Find out up front what they estimate their fees to be, what they charge to file electronically and whether they will represent you in an IRS audit. Avoid any ‘early refund’ ploys like the plague. Some well known tax preparation companies ‘provide’ this service which charges a hefty fee (with a lot of small print) and a lot of advertised hype for you to get your refund ‘early’. It is basically a high-interest loan. Just waiting for your actual refund will save you a lot of money. 3. Remember, tax preparation entails both art and science The science involves the mathematical calculations that in most instances can be figured using calculators and software, and the infinite number of complex tax laws. The art of tax planning comes into play with interpretation of any special circumstances. There are some areas of tax law that leave the government’s intentions unclear. No law can completely anticipate each person’s situation. You could call a dozen different IRS agents with the same question and get as many different answers. A proactive planner will research any unusual circumstances you may have and help you plan a course of action. | 
