Start Planning for Year End

Already we have reached November and year end will be upon us.  To save some anxiety on your upcoming tax return for 2011, here are 5 things you can do to ease the year end process and possibly reduce your liability.

1. Schedule your year-end tax review/tax projection meeting with your accountant.  What is your tax liability going to be?  Do you need to purchase some new equipment?  Contribute to your 401K?  Or set aside some money for cash flow?  When you estimate your tax liability for 2011, consider adjusting your final quarterly voucher or your withholding to avoid underpayment penalties. Check estimated payments for your C corporation for the same reason.

2. Schedule your year-end review with your financial planner.  Is it time to put some extra money into your IRA?  Have you maximized your 401K contributions?  Or, do you need to consolidate those 401Ks?

3. Do you have bad debts?  In this economy, it's possible that you haven't been paid for work performed.  Be sure to talk with your accountant about deducting this on your business tax return.

4. Remember, if you are self-employed you need to pay social security for your wages and the company's portion, be sure you talk with your accountant about calculating your social security wages.  If you are an LLC, does it make sense to elect for an S Corporation for 2012?  If so, you must elect before March 15 of 2012.

5. Consider prepayments for 2012 in December of 2011.   Do you have a child in college?  Expenses paid for you, your spouse, or your dependents will count on your 2011 return if you qualify for education tax credits. Breaks include the American Opportunity Credit, which can reduce your tax bill by up to $2,500 and is partially refundable.

Final tip:  Put those receipts and records together now and get your books clean so you aren't surprised by errors next spring. 

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Please note:  This article is for informational purposes only and is not intended to be guidance nor advice.  Do not apply this information to your situation without additional details and professional advice. Tax laws contain varying effective dates and numerous limitations and exceptions that may or may not apply to your particular situation.   For specific details and guidance, please contact our office.