December 6, 2022

Tax Planning Vs. Tax Preparation: Understanding the Differences

People often wrongly assume that tax planning and tax preparation are the same. As a small business owner, you need both. More companies in Phoenix are relying on CPAs and tax professionals to get the expertise they need. It allows the core team to focus on essential things. Before you look for Phoenix, Arizona tax advisory services, here’s an overview of the differences between tax planning and tax preparation. 

The basics of tax planning

In simple words, tax planning refers to utilizing strategies that help minimize the tax burden. Expectedly, this requires precision at every step and is more of a year-long thing. When you work with a CPA, they focus on the current laws, regulations, and your existing situation to plan the tax filing process so as to maximize deductions. There are several advantages of tax planning, but most importantly, the eventual goal of hiring a professional is to reduce your tax liability. They can help you focus on ways and make investments that can lower the burden, besides guiding you on how to manage your personal and business wealth. 

The basics of tax preparation

Unlike tax planning, tax preparation is a one-time thing. The CPA will focus on the deadlines and ensure that your tax returns are filed on time. This is done once every year. Your accounting team will share the documentation, and the CPA will check all statements and work on the returns. While personal tax returns are not always hard to deal with, you need an expert to guide you on business taxes because compliance, rules, and regulations are complex and change often. When you hire a CPA for tax preparation, you can expect to save both time and money, besides ensuring that there are no errors in the process. 

Hiring the right team

Your best bet is to find an accounting firm that’s based in Phoenix and can help with both tax planning and tax preparation. You can rely on the team to work on your accounting and tax-related work from the start of the financial year, which can help reduce the burden during the tax season. Make sure that the company you hire has experience working in your niche and has worked with businesses with similar tax requirements. The first meeting with a CPA is the most important one, and you should step in with an agenda, including the current challenges your company is facing. 

Get a CPA so you don’t have to take the pressure at the last minute.