What is the difference between tax avoidance and tax evasion?

Tax avoidance is the legal practice of structuring your financial affairs to minimize taxes using provisions of the tax code. Tax evasion involves illegal actions like concealing income, inflating deductions, or hiding money offshore. The line between aggressive tax avoidance and evasion can be nuanced, which is why professional guidance is essential.

Should I form an S-corporation or stay as a sole proprietor?

The answer depends on your income level, self-employment tax exposure, and business circumstances. S-corporations can reduce self-employment taxes by allowing you to split business income between salary and distributions, but they involve additional compliance costs and reasonable compensation requirements. The breakeven point generally occurs when net business income exceeds $40,000 to $60,000 annually.

How will the TCJA expiration in 2025 affect my taxes?

If Congress does not extend the TCJA individual provisions, tax rates will revert to pre-2018 levels (higher rates), the standard deduction will roughly halve, the estate tax exemption will drop from about $13.6 million to approximately $7 million, and the Section 199A qualified business income deduction will expire. Proactive planning before the expiration can lock in benefits and mitigate future increases.

Is tax planning only for wealthy individuals?

No. While high-income and high-net-worth taxpayers often benefit most from complex planning strategies, taxpayers at all income levels can benefit from fundamental planning — maximizing retirement contributions, utilizing tax credits, timing income and deductions, and selecting the right filing status. The key is ensuring the cost of planning is proportionate to the potential savings.

Can tax planning reduce my risk of being audited?

Proper tax planning, when well-documented, can actually reduce audit risk by ensuring that positions taken on your return are legally supportable and consistently presented. Claims that are properly substantiated and within established norms are less likely to trigger IRS scrutiny. If an audit does occur, thorough planning documentation provides a strong defense.

How do I choose between a tax attorney and a CPA for tax planning?

Tax attorneys are best suited for planning involving complex legal structures, entity formation, estate planning, litigation risk, and situations requiring attorney-client privilege. CPAs excel at financial analysis, return preparation, and accounting-based planning. For comprehensive planning, many taxpayers benefit from a team approach with both professionals coordinating.

Tax Planning Attorneys

Experienced legal representation for tax planning matters across all 50 states.

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$1.5+ trillion annually

Individual tax expenditures (deductions, credits, exclusions)

Source: Joint Committee on Taxation

After December 31, 2025

TCJA individual provisions expiring

Source: Tax Cuts and Jobs Act of 2017

$13.61 million per individual

Estate tax exemption (2024)

Source: IRS Revenue Procedure 2023-34

~25 million annually

QBI deduction claimed on tax returns

Source: IRS Statistics of Income

About Tax Planning

Tax planning is the strategic analysis and arrangement of financial affairs to minimize tax liability within the legal framework of the Internal Revenue Code, Treasury regulations, and applicable state tax laws. Unlike tax preparation — which looks backward at transactions already completed — tax planning looks forward, structuring future transactions, investments, and business operations to achieve the most tax-efficient outcomes. Effective tax planning requires a deep understanding of the tax code and its interaction with business law, estate planning, employment law, and investment strategy.

For individuals, tax planning encompasses strategies such as timing income recognition and deductions, maximizing retirement contributions, utilizing tax-advantaged accounts like Health Savings Accounts and 529 education plans, charitable giving strategies including donor-advised funds and qualified charitable distributions, capital gain harvesting and loss harvesting, and planning for major life events like marriage, divorce, retirement, and inheritance. High-net-worth individuals face additional planning considerations including the alternative minimum tax, net investment income tax, qualified opportunity zone investments, and state residency planning.

For businesses, tax planning involves entity selection and structuring, compensation planning, depreciation strategies including bonus depreciation and Section 179 expensing, research and development tax credits, qualified business income deductions under Section 199A, succession planning, and mergers and acquisitions tax structuring. International businesses must also address transfer pricing, foreign tax credits, Subpart F income, Global Intangible Low-Taxed Income (GILTI), and tax treaty planning. The Tax Cuts and Jobs Act of 2017 fundamentally changed the planning landscape, and many of its individual provisions are set to expire after 2025, creating both risks and opportunities for proactive planning.

Why You Need a Tax Planning Attorney

Tax planning matters because the difference between a well-planned and poorly-planned financial strategy can amount to hundreds of thousands or even millions of dollars over a lifetime. The U.S. tax code is intentionally designed with incentives that reward certain behaviors — retirement saving, business investment, charitable giving, homeownership — and penalties that discourage others. Taxpayers who understand and utilize these incentives legally retain significantly more of their income than those who simply report transactions after the fact.

The importance of tax planning has intensified with the approaching expiration of key provisions from the Tax Cuts and Jobs Act. The individual income tax rate reductions, increased standard deduction, doubled estate tax exemption, and qualified business income deduction are all scheduled to sunset after 2025. Without proactive planning, many taxpayers will face substantially higher tax burdens. Businesses face their own planning imperatives as bonus depreciation phases down and interest deduction limitations tighten. Working with a knowledgeable tax attorney ensures that your financial decisions are informed by current law and positioned to adapt to anticipated changes.

Common Tax Planning Cases

Business Entity Selection & Restructuring

Advising on the tax implications of forming or converting between LLCs, S-corporations, C-corporations, and partnerships to achieve optimal tax treatment for the business and its owners.

Estate & Gift Tax Planning

Structuring trusts, gifting programs, and wealth transfer strategies to minimize estate and gift taxes while preserving family wealth across generations.

Retirement Tax Planning

Developing strategies for retirement account contributions, Roth conversions, required minimum distributions, and Social Security timing to minimize lifetime tax on retirement income.

Compensation & Executive Tax Planning

Structuring executive compensation packages including stock options, restricted stock, deferred compensation, and equity incentives to optimize tax outcomes for both the executive and the company.

Real Estate Tax Planning

Utilizing 1031 like-kind exchanges, opportunity zone investments, cost segregation studies, and installment sales to defer or reduce taxes on real estate transactions and income.

Mergers & Acquisitions Tax Structuring

Structuring business acquisitions and dispositions as asset sales versus stock sales, tax-free reorganizations, or Section 338 elections to optimize after-tax proceeds.

Charitable Giving Strategies

Implementing donor-advised funds, charitable remainder trusts, qualified charitable distributions, and conservation easements to achieve philanthropic goals with maximum tax benefit.

Typical Tax Planning Case Timeline

Financial Review & Goal Setting

1-3 weeks

The attorney reviews your current financial situation, tax returns, business structure, and personal goals to establish a comprehensive baseline for planning.

Tax Analysis & Modeling

2-4 weeks

Detailed analysis of current and projected tax liability under various scenarios. The attorney models the tax impact of different strategies to identify optimal approaches.

Strategy Development & Presentation

1-3 weeks

The attorney presents a comprehensive tax planning strategy with specific recommendations, projected tax savings, implementation steps, and associated costs.

Implementation

1-6 months

Executing the planning strategies, which may include entity formation or restructuring, trust creation, investment repositioning, compensation restructuring, or other transactions.

Annual Review & Adjustment

Ongoing (annually)

Regular review of the tax plan to account for changes in income, assets, family circumstances, and tax law, with adjustments to maintain optimal tax positioning.

Know Your Rights

You have the right to arrange your financial affairs to minimize your tax liability through legal means — tax avoidance is legal, while tax evasion is not.
You have the right to claim every deduction, credit, and exclusion that you are legally entitled to under the Internal Revenue Code.
You have the right to choose the business entity structure that best serves your tax and business objectives, even if it results in lower taxes.
You have the right to time the recognition of income and deductions to optimize your tax liability, subject to applicable tax rules.
You have the right to confidentiality in your communications with your tax attorney regarding tax planning advice under the attorney-client privilege.
You have the right to rely on professional tax advice as a defense against accuracy-related penalties if the advice is reasonable and fully informed.

What to Look for in a Tax Planning Attorney

Tax planning requires an attorney who combines technical tax expertise with a broad understanding of business and financial strategy. Look for an attorney with an LL.M. in Taxation or extensive continuing education in tax law. The attorney should have experience with your specific planning needs — whether that is business structuring, estate planning, real estate, or executive compensation. A generalist who does some tax planning on the side is unlikely to identify the full range of opportunities available to you.

Evaluate whether the attorney takes a proactive, year-round approach to planning rather than offering advice only at tax time. Effective tax planning is an ongoing process that responds to changes in your financial circumstances, the tax law, and economic conditions. Ask the attorney how they stay current with tax law changes and whether they have a process for reviewing and updating planning strategies. Consider the attorney's ability to coordinate with your other advisors — CPAs, financial planners, and estate planning attorneys — as tax planning rarely occurs in isolation.

Questions to Ask Your Tax Planning Attorney

1What are the most significant tax planning opportunities available to me based on my current financial situation?
2How will the expiration of the Tax Cuts and Jobs Act provisions in 2025 affect my tax strategy, and what should I do now to prepare?
3What is the projected annual tax savings from the strategies you recommend, and how does that compare to your fees?
4How often will you review and update my tax plan, and what triggers a mid-year review?
5How do you coordinate with my CPA and financial advisor to ensure all planning strategies are properly implemented and reported?
6What are the risks associated with the strategies you recommend, including audit risk and potential changes in tax law?
7Can you help me with both federal and state tax planning, particularly if I have operations or income in multiple states?

Understanding Tax Planning Legal Costs

Tax planning fees vary widely based on the complexity of the client's financial situation and the scope of planning needed. Initial comprehensive tax planning engagements typically cost $3,000 to $15,000 for individuals and $5,000 to $25,000 or more for businesses. Ongoing annual planning retainers range from $2,000 to $10,000 per year. Specific planning projects — such as entity restructuring, trust creation, or M&A tax structuring — are typically priced separately and can range from $5,000 to $50,000 or more depending on complexity. Most tax planning attorneys bill hourly at $300 to $600 per hour, though some offer flat fees for defined planning engagements. The cost of tax planning should be evaluated against the projected tax savings, which often exceed the fees by a significant multiple.

Key Legal Terms

Video Resources

These videos are provided for informational purposes only. The attorneys and organizations featured are not affiliated with or endorsed by Northwind Law.

Tax Planning Strategies for 2024-2025 Before TCJA Expires

Retirement Planning Education

Tax Planning vs Tax Preparation — What's the Difference?

Karlton Dennis

Year-End Tax Planning Tips You Need to Know

Khan Academy

Frequently Asked Questions About Tax Planning

The best time to start tax planning is at the beginning of the tax year, not at year-end. Many planning strategies require advance implementation — entity restructuring, retirement account elections, and estimated tax adjustments are all more effective when done early. However, year-end planning is also important for strategies like tax loss harvesting, charitable giving, and income deferral.

Citations & Sources

[1]
Tax expenditures — the revenue lost to deductions, exclusions, and credits — exceed $1.5 trillion annually, representing a significant portion of total federal tax revenue. — Joint Committee on Taxation, Estimates of Federal Tax Expenditures
[2]
The Tax Cuts and Jobs Act of 2017 reduced individual income tax rates, nearly doubled the standard deduction, and doubled the estate tax exemption, with most individual provisions set to expire after December 31, 2025. — Tax Cuts and Jobs Act, Pub. L. 115-97
[3]
The estate and gift tax exemption for 2024 is $13.61 million per individual, and is scheduled to revert to approximately $7 million (adjusted for inflation) after 2025. — IRS Revenue Procedure 2023-34
[4]
The Section 199A qualified business income deduction allows eligible taxpayers to deduct up to 20 percent of qualified business income from pass-through entities. — IRC Section 199A
[5]
Judge Learned Hand's famous statement that "anyone may arrange his affairs so that his taxes shall be as low as possible" remains a foundational principle of tax planning law. — Gregory v. Helvering, 293 U.S. 465 (1935)

Ready to Discuss Your Tax Planning Case?

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