Terry Balding & Associates - Individual

Income Tax Planning

Income Tax Planning
Fees for Services



Income Tax Planning
Every year "Tax Independence", or "Tax Freedom Day" as it is sometimes called, comes later and later. Tax Independence Day is that day on which U.S. citizens have met their entire tax obligation for that year. For example, the average taxpayer worked until May 3rd in 2001 in order to meet all of his or her federal, state and local tax demands.

For many Americans, preparing and filing tax returns can create unpleasantness and uncertainty. When you file your income tax return, are you:

• Unsure you have paid as little as you could?
• Frustrated by the records you have to keep?
• Concerned about what you will have to pay next year?

• What are your projected federal and state income tax liabilities for the current year, including the alternative minimum tax, if it applies to you?
• Will your current withholding and estimated payments avoid penalties and fines?
• What strategies can reduce your tax liabilities for the current year? When should you implement them?
• What records will you need to keep?
• Are there any recent changes in the law which affect your situation?
• Recent legislation has eliminated many deductions. What kind of strategies are available today?

• Timing income and expenses so that you pay the lowest total amount over several years. 
• Converting taxable income to non-taxable income.
• Deferring taxes to a subsequent year.
• Shifting taxable income to someone in a lower tax bracket, usually children or grandchildren. 
• Deducting expenses

• If you own an asset which has appreciated in value, you can control when the taxable gains are realized; sell and realize the gain in a year when your income is down, you have a loss, or your deductions are higher than usual.
• Prepay state and local taxes in a year when income is high or accelerate deductible contributions to your favorite charities.

• Buy tax-free municipal bonds as opposed to taxable fixed-income securities (but make sure the return is higher than the after-tax return on taxable securities).
• Sell your principal residence after living there two years and avoid paying taxes on up to $500,000 of gain.

• Invest in your company’s 401(k) Plan or, if self employed, a Simplified Employee Pension Plan (SEP).
• Invest up to $2,000 of earned income in an Individual Retirement Account (IRA).

• Give investment assets to your children who are over age 13.
• Incorporate your business (but watch out if you own a personal service company).

• Alimony, as stated in divorce decree.
• Business expenses, if you are self-employed.
• State and local income taxes.
• Property tax.
• Moving expenses.
• Medical expenses, after certain minimums are met.
• Mortgage interest.
• Charitable contributions.
• Advisory fees, after certain minimums are met.