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Better Together: How Tax Prep and Financial Planning Mix

What is your favorite combination?

There are so many incredible pairs out there: chocolate and peanut butter, salt and pepper, pen and paper, the list goes on and on. But one dynamic duo that you may have left off the list and go just as well (if not better) together is tax preparation and financial planning. 

Now, you may be thinking that this combination isn’t nearly as enticing as the Reeses cup brownie you’ve been trying not to snack on, but tax preparation and financial planning complement each other in many vital ways.

Today, I am excited to dive into the relationship between these two tools and how they truly are better together. 

What is tax preparation?

Tax preparation is an annual process where you prepare your financial documents (and checkbooks) to send to the IRS. Many people are intimidated by tax preparation because of the nuances and intricacies of the process including deductions and ever-changing tax law. The IRS has various rules and regulations and if not filed correctly can lead to bigger headaches and costly penalties which leads people to seek help when filing season comes around. 

Traditionally, you would need to seek out this service separate from your traditional financial planner. Why is that? Well, tax preparation and financial planning require two different types of work. Financial planning looks at your comprehensive financial strategy and helps you make smart choices to build your wealth and live the life you want. Tax preparation, on the other hand, is a process that happens once per year.  

Often people assume that their financial planner will also help them prepare and file their yearly taxes, but that often is not the case. The two are quite different in terms of process and function which leads them looking for a different tax professional. But we believe that the two should go hand-in-hand, and we build in tax preparation services into each offering for our clients.

Tax prep requires strong knowledge in tax law, IRS rules and regulations, and fluency in the proper paperwork, timing, and other procedures. We find that tax preparation is a pain point for our clients and have decided to do things differently: combine planning and tax preparation together. 

How they work together

In financial planning, we talk about taxes all the time. Tax planning is another facet of our business and something that we believe is integral to helping clients reach their goals. Tax planning is different from tax preparation because tax planning is a comprehensive strategy that promotes healthy, tax-efficient fiscal habits that will help you build wealth over time. Tax planning is woven into so many aspects of your financial plan that you may not even realize such as:

  • Contributing to retirement accounts

  • Charitable giving strategies 

  • Tax bracket considerations

  • Diversification in asset management

  • Using various savings channels

We focused on so many tax-efficient strategies for giving to charities over the past couple of months from donor-advised funds to qualified charitable distributions, to legacy planning all of which are done in a way to be as tax-efficient as possible. 

Once we have implemented these tax-friendly strategies into your financial plan, it doesn’t stop there. We help you actually navigate the results of those moves and ensure they are accurately reflected on your tax return. By combining financial planning, tax planning, and tax preparation, you are able to feel confident knowing that you have a comprehensive strategy in place and that each piece of this puzzle is taken care of.

The Step by Step way

Here at Step by Step, we believe that strong financial planning and precise tax preparation go hand in hand. Each has its own place in your overall financial strategy and with us, you know that both of them are getting done right. We know our clients: their goals, values, and priorities which gives us the wonderful opportunity of being able to assist them in a personal way. 

We incorporate tax preparation into each service that we offer so that you don’t have to stress when tax time comes. Tax preparation is never an added cost, it is simply just part of who we are and how we believe in serving our clients. Your financial readiness and confidence are so important and by offering both services, we set you up for greater financial success. 

Taxes can be confusing and stressful for many people, and we want to do what we can to alleviate that stress. We are passionate about the role that strong financial planning and accurate tax preparation play in your financial landscape and would love to see what these services can do for your finances. If you would like to learn more or figure out how this process could work for you, give us a call. We can’t wait to hear from you.