Rattiner's Secrets of Financial Planning

CHAPTER 7Dispensing Advice on Income Tax

Rattiner's Secrets: A common question I get from clients is “What can I do tax-wise to minimize my tax liability?” Sometimes the lines are not that clear for our clients. I have had many clients over the years who want to make their sole purpose for investing to avoid paying income tax. As I mentioned in the last chapter, if the client is paying income tax on an investment, chances are that person has made some money on that investment, which would be a good place to be!

Whether you work in the tax area or not, you always must deal with erring on the side of extreme caution. Certainly, if you don't provide tax advice, reach out to an affiliate or to your client's personal CPA. I proceed to answer clients with “We have to make sure we practice tax avoidance vs. tax evasion.” I'm generally asked, “What's the difference, Jeff?” I say, “20 years!”

In all seriousness, tax avoidance is the arranging of financial affairs to minimize tax liability working within the law while tax evasion involves the reduction of taxes through illegal means. There are plenty of ways to work within the system legitimately to minimize the tax liability paid. We'll cover that throughout. Also, the term taxpayer will be used more often than client in this chapter. Lastly, this is not an income tax textbook. There are plenty of good ones around. This chapter covers the practical applications for how you can help your clients in this area.

Planner Income ...