Tax Planning vs. Tax Preparation: They're Not the Same Thing
Many people think about taxes once a year — when April rolls around and it's time to file.
By then, the year is already in the rearview mirror. The decisions that could have made a difference? Many of the deadlines for them already passed.
That's the gap between tax preparation and tax planning. And understanding the difference could change how you think about your money — not just in the spring, but all year long.
What Is Tax Preparation?
Tax preparation is what happens after the year ends. You gather your W-2s, 1099s, and receipts. You hand everything to your CPA. They calculate what you owe — or what you're getting back — and file the return.
It's essential. But it's also backward-looking. You're documenting what already happened. The moves you made (or didn't make) are already locked in.
For most people, this is the only time taxes enter the conversation.
What Tax Planning Does Differently
Tax planning happens during the year. It's forward-looking. Instead of calculating what you owe after the fact, it asks a different question: What moves could we consider right now that might help when tax time comes?
Some of those moves — Roth conversions, charitable contributions, retirement account withdrawals — have a deadline of December 31. Not April 15. By the time you sit down with your CPA in the spring, those windows may have already closed.
Waiting until filing season to think about taxes is a bit like checking your rearview mirror to decide where to turn. The turn already happened.
Where a Financial Advisor Fits In
When it comes to taxes, financial advisors and CPAs don’t do the same thing.
They're not meant to.
A CPA typically handles compliance: making sure your return is accurate, filed correctly, and meets IRS requirements. They're essential for the documentation side of taxes.
A financial advisor can help with strategy: looking ahead to identify what's coming and exploring what might be done about it. This could include timing considerations for retirement distributions, evaluating whether a Roth conversion might make sense in a given year, or coordinating charitable giving with other financial goals.
Together, an advisor and a CPA can cover both sides: the rearview mirror and the road ahead.
Reframing How You Think About Taxes
Taxes don't have to be something you deal with once a year and forget about. For people with more complex financial lives — especially those approaching or in retirement — taxes touch almost every major decision: when to take Social Security, how to draw down retirement accounts, whether to sell appreciated assets.
Those decisions don't happen in April. They happen throughout the year.
Having proactive conversations about tax planning — not just tax preparation — is one way to help ensure you're not ignoring important decisions simply because the timing didn't line up.
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