Income Tax: A Key to Success or Failure
by
Gary A. Lewis, CFP®, CASL®
One of the most important topics in Financial Planning is Income Tax. With nearly 9,000 pages in the Internal Revenue Code, the IRS touches virtually every aspect of our life. Taxes touch nearly every aspect of financial planning as well. When one has a good knowledge of the tax code, one can make decisions that will reduce taxes not only today but later in life as well.
While the properly trained and experienced Financial Planner will have a great deal of knowledge about tax laws, the FP cannot truly provide you with tax advice unless (s)he is also a tax professional. FPs can, however, point out deficiencies and opportunities in your situation and describe a range of remedies. You will always see disclaimers to make sure that you check with your professional tax adviser before implementing any strategies.
There are good reasons for this: 1) the tax law is too big for any one person to fully understand; 2) tax laws are added and changed regularly; and 3) IRS interpretations of the laws are changing continually. Tax advice often is best provided by one who is an expert on your particular situation.
While professional Financial Planners avoid giving tax advice, they are often in a great position to provide you with guidance. Why? 1) true tax planning requires a long term view, perhaps as long as 40-50 years depending on the client’s age; 2) experienced financial planners, especially those with large firm experience, have worked with clients in all walks of life and are more familiar with different individual tax situations and 3) as tax rates are likely to rise in the future, you need to know how tax changes will affect a variety of situations.
While the properly trained and experienced Financial Planner will have a great deal of knowledge about tax laws, the FP cannot truly provide you with tax advice unless (s)he is also a tax professional. FPs can, however, point out deficiencies and opportunities in your situation and describe a range of remedies. You will always see disclaimers to make sure that you check with your professional tax adviser before implementing any strategies.
There are good reasons for this: 1) the tax law is too big for any one person to fully understand; 2) tax laws are added and changed regularly; and 3) IRS interpretations of the laws are changing continually. Tax advice often is best provided by one who is an expert on your particular situation.
While professional Financial Planners avoid giving tax advice, they are often in a great position to provide you with guidance. Why? 1) true tax planning requires a long term view, perhaps as long as 40-50 years depending on the client’s age; 2) experienced financial planners, especially those with large firm experience, have worked with clients in all walks of life and are more familiar with different individual tax situations and 3) as tax rates are likely to rise in the future, you need to know how tax changes will affect a variety of situations.
