2012 Year End Tax Planning
Avoiding an April Surprise
Late July, 2012
Now that we're more than half-way through 2012, it's time to consider your tax position and actions that you can take in response. There are many things you can do in the last part of the year that will affect your tax situation. Come January 1, 2013, most of those options are unavailable for the 2011 tax year. If nothing else, you can become aware of how big a nut (or refund) you're going to face when you file.
There are some major changes to the tax law that are set to expire at the end of this year, with some significant changes coming on-line in 2013. Depending on your circumstances, it's a good year to consider recognizing income in 2012 and deferring expenses into 2013.
2012 has been a difficult year for some workers and many small businesses. It's possible that your earned income is substantially below the level you've come to expect and/or have been paying taxes based upon. While that's painful, the silver lining is that it may present an opportunity to recognize income (Roth conversions; capital sales; other) with no or minimal tax consequences. Honestly, you don't want to let this opportunity pass without making some choices around it.
The stock market volatility of 2008 through 2012 means that many taxpayers have significant capital losses available to use for the year. This presents an opportunity to possibly recognize other long-deferred capital gain income.
If the following apply to you, then you (or your business entity) are a prime candidate for year-end planning:
- There have been significant changes in your income, expenses, withholding, and/or family situation;
- You are self-employed and the results vary materially from the prior year;
- You make estimated tax payments and want the final ones to be on the mark rather than a guess based on prior year or estimated results;
- You bump up against some of the "phase-outs" that haunt taxation;
- Your income and/or expense will be substantially different in future years;
- You have questions about retirement plans for 2012 or 2013;
- Your investments have generated a lot of capital (loss)/gain activity;
- You wonder about the organizational structure of your business;
- 2012 is a TERRIBLE year and you expect negative (or abnormally low) taxable income;
- You've heard of the expanded opportunity to convert assets from IRA to Roth IRA and want to explore that possibility for your situation,
- You're concerned that upcoming tax rate increases will adversely affect you and want to take action in 2012 to accelerate income recognition at today's lower rates, or
- You simply want to know where you stand before the end of the year.
Please call our office to sign up for a time slot. Bring your record(s) of the relevant tax factors to the meeting, and we'll proceed from there. Working together, we can avoid April surprises, and maybe work some late year magic.