Which of the following best describes tax planning?

Tax planning involves strategically arranging a taxpayer's financial situation to minimize tax liabilities while maximizing potential deductions. This process includes a comprehensive understanding of tax laws and regulations, and it often entails anticipating future tax situations and acting on them throughout the year, rather than just at tax time.

By focusing on maximizing deductions, individuals can reduce their taxable income, which lowers the overall amount of tax owed. Alongside minimizing liabilities, tax planning can encompass strategies like timing income and expenses, selecting the appropriate investment types, and utilizing credits or other tax incentives effectively.

The other options do not align with the concept of tax planning as thoroughly. Investing solely in tax-free accounts lacks the broader strategy involved in comprehensive tax planning. Filing taxes only at the end of the year disregards the proactive approach essential to effective tax planning. Lastly, ignoring the tax implications of investments would lead to missed opportunities for tax savings and potentially unfavorable tax outcomes, which the disciplined approach of tax planning aims to avoid.