Tax Tips for Your 2011 Year-End Tax Planning

November 9, 2011

If you haven’t completed your year-end tax planning, you might want to consider it now.  Just in time, come 12 pointers from Grant Thornton’s Washington national tax office.

“It’s not too late to change what goes on your tax return when tax season rolls around,” says Justin Ransome, a Grant Thornton partner in a press statement. “Just a little bit of planning in November can often go a long way on April 15.”

The professional services firm acknowledges that tax burdens for everyone are as challenging as ever, as policymakers are trying to maximize tax revenue to balance budgets.

Grant Thornton is quick to remind you to see your tax advisor for your own situation, but offers 12 tips that fit most anyone’s circumstances.

For brevity here, Grant Thornton’s excerpted list includes:

  1. Accelerate deductions and defer income. Why pay tax now when you can pay tomorrow? Deferring tax is a cornerstone of tax planning. Generally this means you want to accelerate deductions into the current year and defer income into next year. There are plenty of income items and expenses you may be able to control, and business owners and self-employed taxpayers often have the best opportunities.
  2. Bunch itemized deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI).
  3. Maximize “above-the-line” deductions. Above-the-line deductions are especially valuable because they reduce your AGI, and AGI is used to test whether you’re eligible for many tax benefits.
  4. onsider charitable contributions carefully. Think about giving appreciated property to charity so you can deduct the full value without paying capital gains taxes. But don’t donate depreciated property.
  5. Leverage retirement account tax savings. It’s not too late to maximize contributions to a retirement account. Traditional retirement accounts like 401(k)s and IRAs still offer some of the best tax savings in the tax code.
  6. Roll over into a Roth account. “Roth” versions of traditional retirement accounts, such as 401(k)s and IRAs, also provide a great savings opportunity. You don’t get a tax break when you put money into a Roth account, but the money grows tax-free and is never taxed again if distributions are made properly.
  7. Expense business investments. Business owners have been given a great opportunity to save on taxes while investing in their businesses this year. Legislation enacted in 2010 doubles a bonus depreciation tax benefit for property a business places in service before the end of the year.
  8. Consider your salary as corporate employee-shareholder. If you own a corporation and work in the business, you need to think carefully about your salary structure.
  9. Make up a tax shortfall with increased withholding. Don’t forget that taxes are due throughout the year. Check your withholding and estimated tax payments now while you have time to fix a problem.
  10. Don’t forget to use annual gift tax exclusion. If you may have to pay estate taxes eventually, consider establishing a gifting program for your children and grandchildren to take advantage of the annual gift tax exclusion.
  11. Watch out for the “kiddie tax.” The “kiddie tax,” which requires a portion of a child’s unearned income to be taxed at the parents’ marginal rate, has been expanded to apply to full-time students under the age of 24 whose earned income does not represent at least one-half of their support.
  12. Perform an overall financial checkup. The end of the year is always a good time to assess your current financial situation and your plans for yourself and your business. You should think about cash flow, health care, retirement, investment and estate planning.

“Keep in mind that these tax tips are general tax advice and may not be applicable to your particular circumstances,” warns Mr. Ransome. “Make sure that you consult with your personal tax adviser before implementing any changes or additions to your tax planning strategy.”

That’s excellent advice, too. For more details, I strongly urge you to read Grant Thornton’s 2011 year-end tax guide. 

From the Coach’s Corner, here are more financial tips:

Budgeting Basics for a Micro Business

In Any Economy, What Drives Your Profit, Really?

Embezzlement – Tips to Protect Your Nonprofit or Company Assets

Accounting / Finance – Why and How to Determine Your Break-Even Point

6 Values for Financial Protection

“We don’t seem to be able to check crime, so why not legalize it and then tax it out of business?
-Will Rogers

 

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

Seattle business consultant Terry Corbell provides high-performance management services and strategies.