As we approach year end it is time for tax planning.  Many American’s wait until the first quarter of the year to begin to organize their receipts to get prepared for their meeting with their CPA or taxation expert, many times a tax preparer.  Going to this meeting can be like going on a game show to see what one can win or lose, “And the drum roll please!”  We view this as a “rear view mirror” approach, looking back to see what happened.  Financially affluent individuals and families manage their taxation issues very proactively vs. how the typical American handle’s this issue, reactively. 

Many year end steps can be taken by individuals and businesses to make the outcome more predictable.There are numerous strategies that can be deployed ranging from simple, easy to implement tactics to more complicated estate planning requiring the assistance of a qualified professional.  Listed below are a few idea’s to stimulate thought and topics you should address with a qualified professional.   

Make charitable donations. Make sure you get a receipt for any donation worth $250 or more

Donate a stock. If you donate stock, you can claim the full market value as a deduction. But you also avoid paying the capital gains from selling the investment.

Business or Pleasure?  You may be able to claim tax losses from activities the IRS might consider hobbies.

Plan Ahead at Your Job.  If you have a 401(k) plan at work, now's the time to state how much you'll contribute next year.

Purchase equipment or furniture. If you are a business owner, now might be the time to make equipment or furniture purchase’s or it might be the time to either pay yourself more or defer income into next year.

Fund that  retirement account. 401k, Roth, Individual or SEP (simplified employee pension) IRA. For a one-person business, establish a solo 401(k) plan.

Fund college savings accounts. Contributions to a qualified 529 college plan allows one to deduct those contributions as income in the year deposited and reduce one's taxable obligations.

By reviewing the short list above of the many tactics at one's disposal,  one can see that by implementing wise strategies ahead of time and by  taking control of the taxation outcome, the meeting with the taxation professional will be more predictable and in-line with the outcome one desires.  

Available strategies will vary depending on how a person receives income. A traditional W-2 employee will not have as many opportunities to defray, deduct and/or delay taxable obligations when compared to a small business owner or 1099 contractor. There is an effort on the readers part to be able to minimize one's taxation obligations.  Napoleon Hill was quoted  "the pain of discipline weighs ounces, the pain of regret weighs ton's."  Take control of your finances while you can still have an impact on the taxable out come.  Another saying, "it's not what you make, it's what you keep."    

The purpose of this newsletter is not to give legal, estate planning or taxation advice. The goal is to stimulate thought for our clients and those professionals we network with. One should consult with a qualified taxation professional prior to implementing any year end planning strategies. If you do not have a year round relationship with a taxation professional and would like to be introduced to one, please contact our office for a recommendation.  If you are a professional receiving this newsletter, please contact our office to introduce yourself and your services to us.  We are always seeking to grow our referral network and expose professional services to our client base.