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Tax Planning Overview: Taxes Are Negotiated – Not "Fixed"

Tax Planning Overview: Taxes Are Negotiated – Not "Fixed"

Effective Tax Negotiations Requirements

Tax is an expensive cost in our business and personal lives. Tax negotiations require an understanding of tax laws and rules. The most effective negotiations require pre-planning of financial actions and proper deal structures.

Limitations of Tax Planning/strategy

Tax strategies/tactics are limited if financial data are provided after the tax year is over or a deal is completed. The structure of the “deal” or how business financial transactions are handled during the year must include attention to the specific tax rules. Missed little items can result in large tax cost.

Planning Will Depend on These Understanding 4 Factors

  • Quantity - The dollar amount of taxable income.
  • Rules Requirements - Transactions must comply with specific the IRS rules.
  • Timing - When the taxable amounts are actually taxable.
  • Character - Knowing which taxes apply to the amounts taxable.

Other Possible Factors Include

  • Tactics - Tax tactics are the plans used to structure activities to comply with the IRS rules produce the tax benefit.
  • Accounting method - the accounting method can affect taxable amounts.
  • Relationships - structure of the transaction and relationship of entities are critical. Incorrect relationships may nullify a tax tactic.
  • Taxability of Entity - critically important to a tax strategy is the way an entity is taxable.
  • Tracking system - accurate and complete financial tracking is critical to sustaining a tax strategies/tactics.
  • Tax Complexity - the tax laws are complex and detailed – going it alone without competent help can be costly.