While you might only think about tax planning during tax season, planning ahead of time can actually end up saving you time and money. Making preparations throughout the year ensures you're well aware of potential tax deductions and are properly making arrangements for the future. Here are some of the top reasons tax planning is essential all year long, regardless of your income or job.

Why Is Tax Planning Essential? 

1. Get a Large Financial Picture

Working with a qualified accountant each year means that you'll have the tax documentation to view your overall financial picture. Whether you're working toward specific goals or trying to become more profitable, your accountant can help guide you based on your last fiscal year and keep you on track.

2. Optimize Your Tax Deductions

Many people and small businesses miss out on tax deductions because they aren't aware of what they can deduct. Planning throughout the year ensures you are keeping track of expenses and optimizing your return for the maximum deductions, such as your contributions to IRAs or benefits from being a homeowner. For example, getting ahead and contributing to a tax-advanced retirement plan could provide more deductions come tax time. That means more money in your pocket at the end of the day.

3. Lower Your Tax Rate

When tax planning, a CPA can work with you throughout the year to lower your tax rate and reduce the amount of taxable income. Whether this is through deductions or exclusions, they're aware of what options you have available. A great example of this is the American Opportunity Credit that allows taxpayers to reduce their taxes based on their (or their child's) education costs — it could save you a small amount per year. Even if you're not able to make certain deductions, an accountant will work to see if there’s any wiggle room in your overall tax rate. 

Regardless of your financial situation, the team at Daren Katayama CPA in Kailua-Kona can provide the assistance you need. Their expert team knows the ins and outs of tax law, ensuring you get the lowest rates and highest refunds. Tax planning is complicated, so rely on an expert to keep you on track financially. To set up an appointment with one of their financial advisors, call (808) 329-6635 or visit them online to learn more about their services.