I have been approached by quite a few of my regular income tax clients this past month (and some new ones) and most have the same question: What do we need to do to ensure lower taxes and have everything ready for preparation on time? I have the following suggestions for them and want to pass them on to everyone on the internets.
1. Ensure you are keeping proper records. This applies not only to keeping receipts, but also to your financial records for any business you may have. With one client, I did a short review of his company books and found negative accounts in inventory. His book-keeping system was improperly crediting inventory when ordered, but there was no corresponding debit when delivered. Since we started looking early enough, we were able to address the problem rather than being rushed in tax season or having to file an extension.
2. The general rule is that you want to accelerate expenses and defer income, but this may not hold for this year to next year. Generally, because of the time value of money ($1 today will buy more than $1 in one year) you want to report as little in income as possible, while staying within the law. However, we have two factors working against this strategy right now: tax rates are scheduled for a grand increase next year and rates of return are so low that a dollar saved won’t make too much difference anyway.
With an increasing rate in India, demand for IVF treatment icks.org order generic viagra and fertility centres is also increasing rapidly. It’s also useful if you would like sildenafil for sale get rid of 2 – 3 pounds. This figure is quite possible to increase for more than eighty-five minerals within their ionic free viagra india form. It can be brought by environmental reasons, like stress from daily problems; psychological reasons, like anxiety icks.org generic cialis tadalafil and depression; lack of confidence into the rest of your life. How this plays out is best illustrated by a couple of examples using the capital gains rate. This year, 2012, the top federal Long-Term Capital Gain (LTCG) rate is 15%. Next year the LTCG rate is scheduled to increase to 20% and, if the taxpayer’s income is “too high”, then could incur an additional 3.8% surtax. So if you have a gain that you know will be recognized soon, you could stand to save 8.8% in taxes by recognizing it before December 31, rather than later. At a guaranteed rate of return of only 0.4% it will take many years to make up the loss in taxes.
3. Now is the time to purchase equipment or machinery you need. I mentioned this in a previous article that the Section 179 expense deduction is going to seriously curtailed next year. This year you can make qualified purchases up to $125,000 and immediately deduct the cost. Next year, the limit is $25,000 and decreases dollar for dollar on any purchase over the $25,000. As an example, if you needed to purchase a $100,000 tractor and your effective tax rate was 30%, if bought this year, you would save $30,000 in taxes, but next year, you would only get regular depreciation which equals about only $4,200 in tax savings.
As with estate planning, tax planning is much better accomplished the sooner you start. If you have questions or if you need a tax preparer for next year, please do not hesitate to contact my office.
