I was doing a workshop on tax planning in our community in Columbus, Ohio, when a self-assured CPA walked into the room. His confidence was overwhelming as he declared that not only did he already know everything I planned to discuss that evening, but he should be the one delivering the presentation.
I have a bit of a sense of humor, so I had to have some fun with him. During the workshop, I posed challenging questions about tax planning strategies we use with our clients, strategies that often remain unknown or misunderstood by many. I quizzed him on the ins and outs of Roth conversions, the tax implications of claiming Social Security at 62 vs 70 and the concept of a backdoor Roth IRA. As I expected, he did not have the answers.
Tax preparer vs tax planner
This man was a tax preparer, not a tax planner. There’s a difference between the two. Tax preparation is primarily about data entry and number crunching from January to April. On the other hand, tax planning is a year-round activity that involves proactive strategies to save as much money on taxes as possible. We specialize in the tax planning part.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
We were able to humble that tax preparer, and fortunately, he is now a client. We have been able to save him hundreds of thousands of dollars in taxes from the planning strategies that we helped him implement.
Now, I’m not here to talk bad about CPAs. CPAs are great. I recommend everyone work with a CPA to ensure that their tax filing gets done correctly. However, tax planning is not usually a service CPAs provide in depth. It’s a complex process requiring a significant time investment and an intimate understanding of a client’s situation and goals, which most CPAs don’t have the bandwidth to handle.
Tax planners take a deep dive into your taxes
For many of the clients we work with, it can take upwards of 20-plus hours to build a comprehensive tax plan. This involves a deep dive into their tax return from last year to see what we missed and what opportunities they have. Oftentimes, these strategies consist of Roth conversions, tax loss harvesting, tax-efficient income planning for income, Social Security claiming strategies with the impact of taxes and planning to make sure beneficiaries receive as much money as possible with the least tax burden.
All of these are items that most CPAs do not do and that involve a more sophisticated tax plan. They would also need to understand your situation and your goals fully. Most CPAs do not have detailed conversations with you to understand everything outside of the numbers.
To sum up, many retirees miss out on tax planning opportunities simply because they are unaware such possibilities exist. Because of this, I’ve made it my mission to guide as many retirees as possible toward integrating tax planning into their retirement planning strategies, which can significantly reduce one of the biggest expenses in retirement. I even wrote a book, titled I Hate Taxes that shares insights into minimizing tax liabilities through effective planning.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Related Content
- Is Your Financial Adviser Doing a Good Job for You?
- Five Estate Planning Things You Need to Do Now
- Estate Planning: Who Needs a Trust and Who Doesn’t?
- Do You Have at Least $1 Million in Tax-Deferred Investments?
- Do You Have the Five Pillars of Retirement Planning in Place?
-
Investing Abroad Could Pay Off — Here's HowCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Retire in Belize for Stunning Natural Beauty and CultureBelize offers miles of protected land and ocean, a rich mix of cultures and a chill lifestyle. Best yet — the income requirement is just $2K per month.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income PlanningOnce you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.
-
Why Smart Retirees Are Ditching Traditional Financial PlansFinancial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around YouWhile thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.
-
These Are the Key Tariff Issues to Watch in Coming MonthsWhile they're not dominating headlines right now, tariffs are not over. Some key dates are coming up fast that could upend markets all over again.
-
Technology Unleashes the Power of Year-Round Tax-Loss HarvestingTech advancements have made it possible to continuously monitor and rebalance portfolios, allowing for harvesting losses throughout the year rather than just once a year.
-
The Fiduciary Firewall: An Expert's Five-Step Guide to Honest Financial PlanningArmed with education and awareness, you can avoid unethical people in the financial industry by seeking fee-only fiduciaries and sharing your knowledge with others.
