Bauer's Tax Cutting Techniques

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The techniques used are also often thought of as being very mysterious. Nothing could be further from the truth. There are actually several basic tax-cutting strategies, and most plans involve one or a combination of them. In a nutshell, the strategies are:

• Splitting income among several family members (age 14 and older) or legal entities in order to get more of the income taxed in lower brackets.
• Shifting income from one year to another in order to have it fall where it will be taxed at lower rates.
• Shifting deductions from one year to another to place them where the tax benefit will be greater.
• Deferring tax liability through certain investment choices and through pension plan contributions.
• Structuring your affairs to obtain a tax deduction for some expenses paid for things you enjoy - a vacation home, for example.
• Investing your money to produce income that is exempt from either federal or state income tax or both.

Today's tax laws are so complicated that unless your financial affairs are extremely simple, chances are you could benefit from at least occasional assistance from a professional tax preparer. It's too easy to overlook deductions and credits to which you are entitled if you prepare only one tax return a year - your own. The professional who prepares hundreds knows what to look for and what's available to cut your tax bill. The individual who has an accountant prepare his tax return without ever concerning himself with any aspect of it is not utilizing his tax advisor wisely and may still be paying more in taxes than necessary. You know your own affairs better than anyone else. You must be well enough informed about tax planning and the tax law so that you can provide your accountant with information that will produce lower taxes. You need to know what questions to ask, and certainly you need to involve your accountant in financial transactions before they take place so that consideration can be given to the tax consequences.

Leave the technical details to your accountant, but become familiar enough with the general workings of tax planning and the tax law so that you can work in partnership with your accountant to achieve the lowest tax bill possible.