Role of a Financial advisor in Tax Planning

Role of a Financial advisor in Tax Planning

If you are a salaried person or self-employed or are recently retired from the job, the filing of your taxes would be a very stressful time for you. Most of you must be taking professional support for doing this and thus managing to save some tax in the process. However, have you ever thought of the role, a Financial advisor can play in the tax planning?

While an accountant’s job is to file your taxes with the maximum benefit to you, a financial advisor will make sure that your taxes fit with your short and long-term financial strategy throughout the year. His task is to help you identify the sources and types of income you have, how these will change over time, and how the tax will evolve with them.

Life events such as retirement or career change come with a change in income and other benefits. Your advisor can help you optimize your current situation through effective tax planning. He knows exactly what kind of products are suitable for you based on your tax status and also after considering your life goals.

Advantages of seeking the help of a Financial advisor while tax planning:

Ø  After considering your financial goals, your Advisor does your asset allocation based on your risk profile.

Ø  Since he has a complete picture of your financial situation, he is in a better position to recommend you products for tax planning.

Ø  He will not just try to minimize tax for the year but would help you plan your taxes in advance.

Ø  He also maintains a record of trading gains and losses, which can be easily shared with the accountant at the time of filing taxes.

Almost all financial decisions have a tax impact. If the impact of taxes is not taken into consideration while making financial decisions throughout the year, you could be paying more in taxes than you would otherwise.  It is important that tax planning is not seen as separate from financial planning and instead, done simultaneously while making financial decisions and incorporated into your overall financial plan. 

By having a financial advisor helping you in choosing the right investment strategies to minimize the taxes you pay throughout the lifetime, you will be able to plan your current and future cash flows as well.

Most of us handle our taxes in a reactive manner versus a proactive approach. We just share our yearly transaction statements with our accountant and hope for the best. Understanding the impact taxes will have on our financial well-being is very essential. There are always new laws and changing provisions in the tax code, which, again illustrate the importance of planning.

Tax planning and financial planning are closely linked because taxes are such a large expense item as you go through life. So planning to reduce taxes is a critically important piece of the overall financial planning process.

If you want to minimize the anxiety generally associated with the time of tax filing and avoid surprises, consider adding a financial advisor to your tax team. 

To know more about financial planning click here: Wealthsecure

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