How Professional Planning Can Help You Avoid And Address Tax Problems
For professionals, the art of dealing with tax problems often boils down to avoiding them in the first place. While relentless tax planning isn't guaranteed to keep agencies at bay, an organized approach will still have value if something comes up. It's also still useful even if you haven't done previous planning. Here is a look at how professionals approach tax problems and where planning fits in.
If You Have Current Issues
First, it's worth looking at what to do if a local, state, or federal agency has opened an inquiry. The main thing to do is to document all of their concerns, speak with someone at a tax planning firm, and then respond according to the professional's advice.
If you receive a notice from the IRS about unpaid taxes, for example, make several copies of it and store the original in a safe place. Do not respond to the notice until you've sought professional guidance, but make sure you got to a tax services provider as soon as possible. Try to dig out and make copies of all the pertinent documents covering the alleged tax problems so you can get detailed advice.
Oftentimes, tax problems arise from misunderstandings. The IRS might have duplicate reports of income, for example, because a payment process and someone who paid you filed similar but not exactly duplicate copies of the same statements.
If You Just Need to Plan
The ideal scenario is planning ahead. It's a good idea to organize all of the papers pertaining to your situation. Someone who owns a business, for example, should be able to document whether the operation is organized as an LLC, S-Corp, sole property, or something else.
You want to be able to document all of your accounts, assets, and liabilities. A person planning for retirement, for example, should be able to identify any 401k plans they have and what the dollar amounts in them are. The same goes for any relevant assets, such as houses, cars, rental properties, and business stakes. Similarly, you'll want to know who owns your debts and what sorts of debts they are because there might be tax benefits from how you handle them.
Check In Regularly
It's prudent to conduct a tax planning review at least once a year. This will allow you to keep up with changes in the tax code and your life situation. As things change, a tax services firm can help you pivot to take advantage of the circumstances and try to mitigate any hits on the downside.