Tax Preparation and Planning: What’s the Difference


As we know, different countries focus on taxes which involve the process of tax planning as well as tax preparation. The professionals are helpful in preparing tax returns. You can also get tax savings with the help of the effective work of a professional tax preparer.

You will get detailed information about tax planning & preparation once you read this guide properly.

Tax Planning

Tax planning can be defined as the process of managing the financial situation of a taxpayer effectively. The reason is to minimize the burden of tax on the taxpayer at the state and federal levels. You can get the best and most efficient tax planning services from professionals.

It is a service that is helpful for you in optimizing the tax situation before the process of reporting. The objective of tax planning is to use legitimate methods for optimizing the potential tax consequences that are based on your plans and goals for the future.

Types of Tax Planning

There are many types of tax planning but the most common types are discussed below:

Short-Term Planning

In this method, the process of tax planning is performed at the end of the fiscal year. This method is performed by experts for searching different ways for limiting tax liability in a legal way. Short-term tax planning does not involve long-term commitments.

Long-Term Planning

Long-term planning is a process that undergoes for a long time and also involves detailed discussions with the clients. This discussion involves the details about the long-term goals of the clients. Moreover, the expectations and hopes of the clients are also determined by what they want to achieve with their wealth.


The major benefits of tax planning include minimizing litigation. It means it involves resolving tax disputes with foreign, state, federal, and local tax authorities. Tax planning is also helpful in reducing tax liabilities where it is the wish of every taxpayer to reduce their tax burden. It is because people want to save their money for the future which is worth doing.

The clients can reduce their payable tax with the help of the arrangement of their investments. Tax planning helps in ensuring the economic stability of the taxpayers. A healthy inflow can be enjoyed with the help of effective planning and management of the tax. Moreover, it is also helpful in leveraging productivity.

Tax Preparation

It’s a service that needs a professional person to keep a check on past years’ performance and provide an accurate accounting to the IRS related to the amount of tax that the client owes. Different types of methods and techniques are used by the tax preparer for minimizing this amount. They offer opportunities for improving the tax picture of the clients for the past years.

It is a service that is helpful for you in filing your tax returns. The objective of this service is to ensure that your tax reporting consists of both state and federal tax laws. The process of tax planning is simple as it may involve planning for the event of capital liquidation.

Types of Tax Preparers

The most common types of tax preparers have been mentioned below:

Certified Public Accountants

A CPA is a licensed person that offers you the best and most reliable accounting services. He is responsible to maintain the financial records, preparing tax returns, providing auditing services, and examining financial statements. Further, a CPA has the authority to represent the customers on any tax matters that may include appeals, payment and collection issues, and tax audits.

Enrolled Agents

An EA is responsible for managing tax-related operations. He is certified by the IRS and has the right to represent the clients on any matter related to tax. His responsibilities may include representing the clients, preparing business and individual tax returns, etc.

Tax Attorneys

Tax attorneys require a law degree and license to work professionally. He is aware of the updates and changes in the laws. That person is responsible for the planning and preparation of tax returns and gives advice to the clients regarding different strategies that could be helpful in reducing taxes.

Non-Credentialed Preparers

A non-credential preparer is responsible for preparing the taxes without the need for any professional certifications or credentials. Also, they provide you with efficient services for tax preparation. You can get expert tax preparation services from an experienced preparer.


Tax preparation service plays a vital role in every type of business. Every business needs expert and reliable tax planners and preparers so that the business could grow and become successful. The preparation is helpful in making business strategies to generate more profit.

Further, you can get risk-free services by hiring a tax professional for your business. It is because the professionals provide you with efficient services regarding tax returns. In addition, they have proficiency in the field of tax where the risks of supplying errors are zero or minimum.


Finally, if you want efficient tax planning and preparation services for your business, you must know about the differences between them. So this guide has provided you with detailed information about both services.

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