10 Basic Tax To-Dos for the Rest of 2014

Here are 10 things to consider as you weigh potential tax moves between now and the end of the year. Answer:

Make time to plan:

Effective planning requires that you have a good understanding of your current tax situation, as well as a reasonable estimate of how your circumstances might change next year. There’s a real opportunity for tax savings when you can assess whether you’ll be paying taxes at a lower rate in one year than in the other. So, carve out some time.

Defer income:

Consider any opportunities you have to defer income to 2015, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents and payment for services. Doing so my enable you to postpone payment of tax on the income until next year.

Accelerate deductions:

You might also look for opportunities to accelerate deductions into the 2014 tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year, instead of paying them in early 2015, could make a difference on your 2014 return.

Note: If you think you’ll be paying taxes at a higher rate next year, consider the benefits of taking the opposite tack-v-v looking for ways to accelerate income into 2014, and possibly postponing deductions.

Know your limits:

If you adjusted gross income (AGI) is more than $254,200 ($305,050 if married filing jointly, $152,525 if married filing separately, $279,650 if filing as heard of household), your personal and dependent exemptions may be phased out, and your itemized deductions may be limited. If your 2014 AGI puts you in this range, consider any potential limitations on itemized deduction as you weigh any moves relating to timing deductions.

Factor in the AMT:

If you’re subject to the alternative minimum tax (AMT), traditional year-end maneuvers such as deferring income and accelerating deductions can have a negative effect. Essentially a separate federal income tax system with its own rates and rules, the AMT effectively disallows a number of itemized deductions, making it a significant consideration when it comes to year-end tax planning. For example if you’re subject to the AMT in 2014, prepaying 2015 state and local taxes probably won’t help your 2014 tax situation, but could hurt your 2015 bottom line. Taking the time to determine whether you may be subject to AMT before you make any year-end moves can save you from making a costly mistake.

Maximize retirement savings:

Deductible contributions to a traditional IRA and pretax contributions to an employer-sponsored retirement plan such as a 401(k) could reduce your 2014 taxable income. Contributions to a Roth IRA (assuming you meet the income requirements) or a Roth 401(k) plan are made with after-tax dollars, so there’s no immediate tax savings. But qualified distributions are completely free from federal income tax, making Roth retirement savings vehicles appealing for many.

Take required distributions:

Once you reach age 70 ½, you generally must start taking required minimum distributions (RDMs) from traditional IRAs and employer-sponsored retirement plans (an exception may apply if you’re still working and participating in an employer-sponsored plan). Take any distributions by the date required-the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that should have been distributed.

Know what’s changed:

A host of popular tax provisions commonly referred to as “tax extenders,” expired at the end of 2013. Among the provisions that are no longer available: deducting state and local sales taxes in lieu of state and local income taxes; the above-the-line deduction for qualified higher-education expenses; qualitied charitable distributions (QCDs) from IRAs; and increased business expense and “bonus” depreciation rules.

Stay up-to-date:

It’s always possible that legislation late in the year could retroactively extend some of the provisions above, or add new wrinkles – so stay informed.

Get help if you need it:

There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional that is able to evaluate your situation, keep you apprised of legislative changes, and help you determine if any year-end moves make sense for you.

Please call me to find out more information, Jennifer Williams, President J. Williams Personal Financial Planning: 413 S. Curry St, Tehachapi, California Office Phone 661-822-7517 Office Email: [email protected] Jennifer is a Registered Financial Consultant. She has over 20 years of experience in the industry.

Article is Courtesy of Forefiled, LLC Securities offered through NPB Financial Group, LLC. A Registered Investment Advisor/Broker-Dealer Member FINRA, MSRB, and SIPC..