Personal Finance Essentials
Taxes
Understanding
Tax Planning & Preparation
Tax planning and tax preparation are essential elements of the financial planning process. While it’s a favorite American pastime to complain about taxes, we all recognize that our system of voluntary taxation is fundamental to allowing us to maintain our society. Every American has a duty, therefore, to pay the taxes they owe to our federal, state and local governments. However, Judge Learned Hand famously wrote in 1934:
“There is no reason for anyone to pay more than the amount required. Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”
This is why tax planning is vital: to make sure you pay what you owe – and only what you owe, taking advantage of every credit, deduction, exemption and exclusion offered by the federal and state tax codes.
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