As year end approaches, I want to remind you once again that now is the time to get ready for the tax season — for us and you.

We’re prepping now by staffing up, training and getting organizers out to clients. You can prep too.

One of the first things you should do is perform an overall financial checkup. The end of the year is always a good time to assess your current financial situation and plan for the future. You should think about cash flow, health care, retirement, investment and estate planning. Check wills, powers of attorney and health care proxies for changes that may have occurred during the year. Use the open enrollment period to reconsider employer-sponsored programs that could reduce next year’s taxable income. HSAs and flexible spending accounts for dependent care or medical expenses allow you to use pre-tax dollars. Remember, it’s never too early or too late to start planning for the future.

Here are some basic points that should be reviewed:

1.) Increasing withholding. For those clients with substantial non-wage income to assure that taxes appear to be paid in to the government in a timely manner.

2.) Deferring or accelerating income. As discussed in prior month’s “filling up” a tax bracket and avoiding pushing income to the higher level brackets can some considerable money. Along with that, one must look at what adding or deferring income can mean to any thresholds such as the taxability of social security or the loss of itemized deductions for example.

3.) Look at your portfolio. Now may be the time to sell some of those “winners” or “losers” to offset any other gains or loses you already have.

4.)  Bunching of Itemized Deductions. For those who consistently just barely beat the standard deduction, it may be much more advantageous to group two years’ worth of itemized deductions all into one year and then take the standard deduction the other year. Don’t forget, charging those items on a credit card COUNTS as them being paid even for cash basis taxpayers.

5.) Gifting of assets.  Not only does gifting of assets help to reduce the potential estate of a taxpayer (and the significant estate taxes that go along with that) but it can also eliminate some income. Gifting of highly appreciated stocks to that charity you love, may grant you a large tax deduction now and eliminate some dividend income, which is subject to the additional investment tax, in the future.

It’s not quite the last minute, so take some time to review your options by Dec. 31. Doing so will  minimize some of your tax liability. We are here to help.


Article by: Brad Voght, C.P.A.