Column: Taxes: filing vs. planning


Commentary by Joe Clark

The countdown for filing 2015 tax returns is finished and the taxes are off to Washington. There are two tax systems at play in the U.S. — and some politicians proclaim there is one system for the rich and another for the poor — but the reality is there is one tax code for the informed and one for the uninformed.

Your tax return is similar to a symphony where instruments work in unison. Your tax return works the same way where one line works with the next. Just one bad financial decision can create an input that creates negative consequences on the rest of your return.

Albert Einstein described insanity as doing the same thing over and over while expecting a different result. Every year individuals pick up their taxes from their CPA firms and gasp at the amount owed. Then they complain, scribble their names on a check, file the return in a drawer and repeat the process the next year — insanity!

Tax planning is a central part of financial planning and needs to be conducted before December 31.  April is the season to tax report. The number of individuals who spend countless hours on investment statements but disregard their 1040 tax return is staggering. In my humble opinion, there is no entity that will separate most American families from their retirement more dramatically than the IRS. Markets go up and down, but rarely does the IRS send a check back.

As we conduct financial planning in 2016, our objective is to be as tax savvy as possible. Pay attention to line 43 on your tax return and find out how much income was actually subject to taxation. Once you know that number, you can make some very important decisions including whether or not you should consider a Roth IRA or contribute to a college fund. The IRS provides us a rule book, but it is our job to use those rules to create the best possible scenario during the year so that our accountants can provide savvy tax reporting next April.

Joseph Clark is a Certified Financial PlannerTM and the Managing Partner of the Financial Enhancement Group, LLC an SEC registered Investment Advisor. He is the host of “Consider This” found on WQME Saturday mornings at 9 and a former Adjunct Assistant Professor at Purdue University where he taught the capstone course for a degree in Financial Counseling and Planning. Securities offered through World Equity Group, Inc., member FINRA/SIPC, a broker dealer and SEC registered Investment Advisor. Advisory Services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated and are not affiliated. Big Joe can be reached at, or (765) 640-1524.


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