Financial Focus: Are you ready for a Big Income Tax Refund?

Financial Focus: Are you ready for a Big Income Tax Refund?

by Anthony Rivieccio, MBA, PFA

Holiday time is over!

Thanksgiving and Christmas have passed. The time for spending has finished! It is time to pay those holiday bills.

Maybe you’re thinking you’re income tax refund will bail you out? In some ways, it can- if its higher, right?

After all, who isn’t going to need a higher tax refund? Okay, cool. Did you tax plan? Tax plan? What’s that?

What is Tax Planning?. No, it is not Tax Preparation. That can take anywhere from 15 minutes to 6 hours, based on the preparation of the worksheets and schedules. Tax planning is much more comprehensive.

I like to say that the difference between Tax Preparation & Planning is like baking a cake. Tax planning is getting all the ingredients or receipts and put them in their proper places, while
tax preparation goes from mixing all the ingredients to popping the cake mix into the oven and letting it bake. Like anyone who bakes or cooks knows, getting all the “right” ingredients takes time but the cake will surely taste better!

At the end of 2016, many tax rates and breaks were made permanent. The increased certainty brought by these tax law changes has in some ways made tax planning a little easier.

But in recent years,  changes also brought tax hikes to many higher-income taxpayers. In addition, some new and expanded taxes under the Affordable Care Act (ACA) now affect higher-income taxpayers.

It’s also important to remember that, even though many tax law provisions are now “permanent,” with tax reform still on its agenda, Congress may make some major changes in the future. So in your tax planning, don’t count on the tax regime remaining the same indefinitely.

What does this all mean? Tax planning is as essential as ever.

Tax Planning –in its purest form– should provide an overview of key tax provisions that you need to be aware of and offer you a wide variety of strategies for minimizing your taxes. But there isn’t enough space to touch on all of the available tax-savings opportunities.

NOW, is the time, to sit down with a tax or financial advisor and let him take you through a  “tax overview” of your life and lifestyle habits. After a through examination, he or she should be able to prescribe a “checklist of deduction and credits” you  could be eligible for, or more importantly, should be incorporating into your lifestyle already — you’re just not receiving the tax benefit. Remember, we get taxed on NET INCOME, not GROSS INCOME!

What’s the difference? The subtraction of tax deductions and credits brings you to your net income — on which our taxes are assessed.

The lower your net income, the lower your tax rate. In theory, the lower your tax rate, the higher your tax refund will be.

Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating their 20th year as a fee only financial planning firm specializing in solving one’s financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.

For financial inquiries, assistance or a FREE COPY of a 2015 Income Tax Guide, Anthony can be reached at (347) 575-5045 or advisorsgroup@ymail.com.