The Ideas for Your Article in this section focus on tax planning. If you would like to use one of these articles in your news and announcements section, simply let us know the article number (in parentheses after the title). Don’t use one of our newsletters? Find out more here.

Tax Planning and New Year’s Eve (#1014-1275)

In many ways, tax season is similar to New Year’s Eve.  How is that so?  Tax season is full of anxiety and deadlines.  New Year’s Eve is full of parties and fun.  The similarity is that like New Year’s Eve, tax season is a time when many of us evaluate the last year and make resolutions for the year ahead.  Although many of us dread tax season, it is a good time to focus on financial goals.

At tax time, we spend hours going through the financial details of the past year and vow that we are going to have better control of our financial situation.  However, once our return is filed, we are so relieved that we forget the anguish gathering our financial records caused us.  So, once again, we postpone our resolution to take control of our finances and start seeking guidance in how to manage our finances.

It doesn’t have to be that way.  This year, make a financial planning appointment.  Even though there is no magic to the act of financial planning, the key is getting started.  You need to have a plan to help you succeed.  Make this the year you finally begin to map out your financial future.  Then next year, the anguish you normally feel when gathering your tax information will be replaced with a wonderful sense of accomplishment.

Preparing for Your Preparer (#0107-784)

If you’ve decided to spare yourself the aggravation of preparing your own tax return, does that mean all you have to do is dump your documentation on your tax preparer’s desk? While that may be the easiest approach, it’s probably not the best one.

Although tax preparers are certainly capable of sifting through your tax documents, it’s generally a very expensive way to get yourself organized. Your tax preparer will probably charge you an hourly fee for this service and probably won’t be able to do it as quickly as you since you’re more familiar with the records. Furthermore, although the tax preparer can analyze what is there, he/she may not notice if certain documentation is not there, especially for unique transactions, such as the sale of securities. You may then lose a valuable deduction.

Although organizing your tax records is not an exciting task, it’s not an insurmountable one either. Start by gathering all forms sent to you by third parties – W-2s, 1099s, K-1s, etc. Next, collect receipts and canceled checks that document deductions you plan to take. Finally, gather documentation for non-routine transactions like the sale of a house or securities. Often reviewing your tax return from last year will jog your memory about items to collect. After you’ve gathered all these records, organize them by income and deduction category, then total all items by category.

By making the effort to organize your tax records, you’ll save your tax preparer time and help ensure that you do not overlook any deductions.

Making Charitable Donations (#0102-464)

Public support for charitable causes has long been embodied in the tax law through income and estate tax deductions for charitable donations. If you are considering a donation to a charity, you need to be aware of the tax benefits available to you by gifting appreciated securities. Here are a few answers to questions you may have:

Q: How do I qualify for a deduction when I donate securities to my favorite charity?

A: You must hold appreciated securities for longer than one year. A donation of securities to a qualified charity will give you a tax deduction equal to the fair market value of the securities on the day of the gift. For gifts of appreciated securities, the deduction is limited to 30% of adjusted gross income. If the total value cannot be deducted in the year of the gift, you have five years to take the balance of the deduction. The 30% of adjusted gross income limitation contrasts with the 50% of adjusted gross income limitation that applies to donations of cash.

Q: Why donate appreciated securities rather than cash?

A: If you sell securities and donate the proceeds, you will still get the tax deduction. However, you will have to pay tax on any capital gains from the sale.

Q: What happens to a donation of depreciated securities?

A: If you contribute depreciated securities, the deduction is limited to the fair market value at the time of the gift. In this case, it is better to sell the securities and donate the proceeds. By doing this, you will recognize a capital loss and receive a charitable deduction.

Q: How do I determine the value of my appreciated securities?

A: The value of an appreciated securities gift is the average between the highest and lowest price on the day the gift is considered completed.

Tax Planning: Tax Time Approaches (#0101-399)

One of the most unpopular times of the year is right around the corner. After basking in the warm glow of the holidays, we see tax time as an unwelcome but inevitable reality check. During this annual process, part of my job as your financial advisor is to educate you on the options available.

Tax preparation is not the same as tax planning, though many people confuse the two. Tax preparation is the flurry of last-minute receipt grabbing and scribbling that most people go through. Planning is an ongoing process, one that begins anew each year. Throughout the year, look ahead and plan with ways to help you reduce your tax bill. Can you make a $2,000 contribution to an individual retirement account (IRA) for you and your spouse? Should you purchase a tax-exempt or tax-deferred investment? Are you contributing to your 401(k) plan? These questions, among many others, form the basis for a tax plan. Together, we can review strategies to help you reduce your taxes.

April 16 (the 15th is a Sunday) will be here before we know it. Please feel free to give me a call with any questions or concerns.

Tax Planning Leads to Tax Savings (#0101-400)

Did you consider any of these tax strategies to help you reduce your taxes for 2000?

  • Pay state taxes before year end to maximize deductions.
  • Prepay your second property tax installment.
  • Prepay January’s mortgage payment.
  • Change personal interest to fully deductible home mortgage interest.
  • Defer bonuses and compensation until January.
  • Sell property on the installment method.

These are just a few of the possible tax planning strategies that could have helped you reduce your 2000 tax liability. If you haven’t actively followed a yearlong tax plan, you may have paid more than you needed to in income taxes.

The goal of every taxpayer should be to take full advantage of all the legal methods available to reduce his/her tax liability. Remember, effective tax planning takes into consideration the various tax alternatives before completing a transaction. This is one of the areas in which a tax professional can be of service to you.

If you have a desire to reduce your taxes or to discuss investment tax strategies, please call.