This alert is designed to offer easy to understand and implement year-end strategies. It is also designed to stimulate thought and inspire action during one of the most challenging year-end tax planning environments.
This year will be unlike any other. Not only are there expiring provisions, but there are also provisions that already expired that may or may not be reinstated. There are also more than 20 new taxes under the patient Protection and Affordable Care Act, or also known as Obama care, which may or may not be repealed. As a result of unprecedented levels of uncertainty, the complexity of tax law for 2012 has increased.
Aside from these tax uncertainties, there is the “fiscal cliff,” which is the term used to describe the challenge that the United States and its citizens and taxpayers will face on January 1, 2013, when substantial spending cuts are scheduled to go into effect as a result of the Budget Control Act of 2011. Cuts are expected in the defense budget and in Medicare as well as more than 1,000 government programs, and taxes are scheduled to increase in many ways.
Things the taxpayer should consider:
- Don’t forget that tax planning is a year-round activity. It is prudent to keep taxes in mind throughout the year, not just at year-end. This year-round approach will give you plenty of time to evaluate your situation and make necessary changes.
- Don’t forget that any decision to save taxes by accelerating income needs to consider the possibility that this means paying taxes early and foregoing the use of money that could have been otherwise invested.
What actions should be considered?
- Consult your tax practitioner and look at your tax situation for at least two years at a time.
- Consult your financial planner and stay focused on sound financial-planning principles.
- Consult your estate lawyer and review your current estate plan.
- Based on current law plan now and revise those plans quickly as the law and your needs change.
- Defer of Accelerate Income
- Take advantage of 0% Rate on investment income
- Be bold in timing investment gains and losses
- The 3.8% Medicare Surtax
- Convert traditional IRA into a Roth IRA
- Require minimum distributions – for those age 70 ½ in 2012
- Beware of Alternative Minimum tax
- Do not ignore estate planning
- Take Advantage of tax Breaks
To discover how we can help you, please give us a call at 401-254-0151. We look forward to hearing form you.