Current Issue in Tax Planning or Tax Research

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Current Issues in Tax Planning

It is the intention of every taxpayer to minimize their tax liabilities whenever possible . This is where the concept of tax planning comes into focus

Tax planning is the evaluation of tax position and its outcomes by considering for example the business decisions and strategies with the objective of reducing the tax burden in the current period or in the long term

It is simply analysing one 's business or personal activities and formulating plans that

are able to minimize the tax liability

Individuals and businesses can utilize tax planning in areas like accounting methods employed (cash and accrual concepts , stock valuation methods (LIFO , FIFO , capital expenditures , insurance contributions pension contributions and even tax-deferred investments (Ref

Tax planning can also be used ion transactions involving mergers and acquisitions . In mergers and acquisitions , tax planning can help in evaluating the amount tax savings and risks incurred and thereby reducing costly mergers or acquisitions (Busenhart , Slide 3

Tax planning process

In undertaking a tax planning , several factors are considered , key among these are

Tax filing form- which one to

Filing status

Tax planning for income

Taxation of investments

Tax Filing for extension

Payment options

Deduction and credits

Tax returns

It is important that a taxpayer identifies the tax form that best suits their needs in terms of financial and legal conditions . Filing the correct form will ensure that the IRS works on the taxpayers tax returns in a timely and accurate manner (Perez

Some of the widely used tax forms for filing income tax for individuals are 1040EZ , 1040 A and the 1040

Tax filing status

An individual can have many filing options and therefore it is paramount that one understands the rules and regulations of each status because each has benefits and drawbacks as well

The individual income tax filing status can be single , jointly married separately married , head of household and qualifying widow (er ) with dependant . These statuses call for different tax rates

Single status is only determinable at the last day of the year . One has to be single or divorced or separated at that date . This status however , leads to higher rates faster compared to other (360 Degrees of Financial Literacy

Joint filing status is possible if married , separated but still married or separated but not finalized . This status results in joint income exemptions , credit and deductions . It also has many tax credits e .g child /dependent care , hope credit , adoption expense credit and lifetime learning credit

Qualifying widow (er ) status can lead to the most deductions (standard available to joint tax returns . To on this status , one must have not remarried before the year end , have a qualifying dependant child provide more than half of upkeep cost , qualified to a joint return for the year the spouse died or the spouse died during the last 2 years (360 Degrees of Financial Literacy

Filing married but separate returns can be appropriate if one is personally...