Is Your Financial Planning Tax Compliant? (Part 1)
More than 134 million US citizens filed individual income tax returns in 2005. This colossal figure represented growth over 2004. The adjusted gross income represented by these 2005 tax accounts exceeded $7 trillion, and the figure grew by over 9% over 2004. It appears that our national financial planning is on track, and that we are a nation of honest tax payers! We see similar trends with small enterprises: the number of partnerships approached 3 million in 2005, and reported income grew by over 40%. Impressive as these figures may seem in financial planning terms, they tell only half of the tax compliance story.
A survey of tax litigation in 2007 shows an array of court judgments that indicate both poor and contrived financial planning by many individuals and entities. Torts by tax preparers are common, and there are several cases of the courts debarring them from pursuing this line of work. It appears that too many of us leave our tax returns to others, and suffer from the effects of incomplete tax compliance as a result. Fines and examinations can eat in to financial planning efforts, so unvarying tax compliance is the essential infrastructure for achieving financial security for life.
Tax Prevarication and Ignorance Threats to Personal Financial Planning
Criminal tendencies through the tax evasion path to financial planning are fortunately rare. There are periodic cases of outright fraud, and though the Internal Revenue Service (IRS) loses no opportunity to get as much media attention as possible every time it secures a conviction, the vast majority of us have genuine feelings about paying our taxes, and about our financial planning imperatives. That does not absolve us of allegations that most people put off for tomorrow things which should be done today. Check the agendas for next week of your friends and associates, and you will probably find no common entries for completing all the small chores that are integral to full tax compliance in financial planning.
We can all plead ignorance about tax matters. Financial planning is supposed to be about making money, not paying for wars in Iraq and that neighborhood! Every IRS bulletin carries an exhortation to stay away from spurious advice, so it appears that there is little love lost for the hard-working bureaucrats who desperately want to keep our books of account in good order. There are two essential approaches to achieving tax compliance in your financial planning: one is to keep abreast of the rules, and the other is to become a fanatic book-keeper.