US Tax Tips
Tax planning is an activity that is best pursued year-round. You can
use the following list of tax strategies to help you better carry out
your planning on a regular and ongoing basis.
Before-Tax IRA Earnings. Contributing before-tax earnings to
an IRA account can make a big difference in your retirement savings,
since you can defer paying taxes on whatever your investment earns in an
IRA. If your investment pays dividends or has capital gains
distributions (such as some mutual funds), you avoid paying taxes on
these gains. If you expect your tax rate to drop after your retirement,
because you have less income, your savings could amount to an even
bigger nest egg.
You may contribute up to $3,000 of your earnings or up to $3,500 if
you are age 50 or more. If your modified AGI is above a certain amount,
your contribution limit may be reduced. The limit is scheduled to
increases to $4,000 in 2005-2007, and $5,000 for 2008. The limit will be
indexed (increased with the rate of inflation) in $500 increments
starting in 2009.
If you earn an income from wages or your own business and you're
under the age of 70-1/2, you can open a traditional IRA. For lower
income earners, the contribution itself may be deductible. Contribution
can be made for the prior tax year up until April 15.
But you may find that other tax-deferred retirement investments are a
better deal. Some other options are described below. The IRS publication
(590) is available at this link.
SEP IRAs. A “Simplified Employee Pension IRA” is a
tax-deferred retirement plan provided by sole proprietors or small
businesses, most of which don't have any other retirement plan.
Contributions are made by the employer, and unlike the traditional IRA,
can be as high as 25% of each employee's total compensation, with a
maximum contribution of $41,000. For a sole proprietor, this can be a
significant opportunity to save for retirement on a tax defer basis.
Employees with SEP-IRAs can also invest in regular IRAs.
Aside from the higher contribution limits, SEP-IRAs are subject to
the same rules as a regular IRA. Contributions and the investment
earnings can grow tax-deferred until withdrawal (assumed to be
retirement), at which time they are taxed as ordinary income.
401 (k)s. A 401(k) plan is an employer sponsored plan that
lets you contribute a percentage of your salary to a trust account,
putting off any taxes on that money until you withdraw it, usually after
age 59 1/2. Companies often match some of your contribution, and any
taxes on those matching funds are also deferred, as long as the total
going into the account does not exceed the limit for the year. Like with
IRAs, the earnings in the account grow, tax free, until you withdraw the
money, and if you expect your tax rate to drop after your retirement,
because you have less income, your savings could amount to an even
bigger nest egg.
Through automatic payroll deductions, you can usually contribute
between 1% and 25% of your eligible pay on a pre-tax basis, up to the
annual IRS dollar limit of $13,000 ($16,000 if you're age 50 or older).
In this case, you are making salary-reduction contributions that reduce
your take home pay, but also your income tax basis, a significant tax
break vs. “after tax” investments.
There are typically IRS penalties associated with early withdrawal of
401(k) assets, but many plans allow you to borrow against your assets.
If you leave an employer, you may be able to keep your plan with the
employer, or “roll it over” into an IRA, avoiding these penalties.
Consult your plan administrator for details.
20% Withholding on Distributions from Qualified Employer Plans.
Income tax withholding may apply to distributions made from qualified
employer plans. Withholding at a rate of 20% is required on a
distribution, unless it is transferred directly from your employer to an
IRA trustee or another employer plan. The withholding rules do not apply
to distributions from IRAs or Simplified Employee Pensions, also known
as SEPs. However, if you wish to rollover a qualified plan distribution
to an IRA, be sure to transfer the amount directly from your employer to
an IRA trustee or another employer plan. Otherwise, 20% of the
distribution will be withheld while 100% of the distribution must be
rolled over within 60 days. If you don't have the money to cover the 20%
shortage, income taxes and possibly a 10% penalty will be due on the
amount not rolled over.
ROTH IRA. A ROTH IRA, is in some respects the opposite of a
traditional IRA: You pay taxes on the money that you put into the
account up front, but once you reach age 59 1/2, (after having had the
Roth IRA for five years), you can withdraw the money, including interest
earned, tax free.
For some people, paying taxes now to enjoy tax-free income later may
actually make more financial sense in the long term. For one thing, the
Roth IRA lets you shelter more money for retirement. The annual
contribution limit is the same for both a traditional IRA and a Roth
IRA, but because your Roth contribution is made with after-tax income,
your annual contributions can compound substantially over the years
without incurring any future tax liability.
Whether the Roth IRA is a better option really depends on what you
think your future tax rate will be. If you plan to maintain a high
levels of income even in retirement, it may make more sense to pay taxes
on your contribution today, while you're still employed, so you can
enjoy the tax-free withdrawals later.
To contribute to a Roth IRA, you must have compensation (e.g., wages,
salary, tips, professional fees, bonuses). Your modified adjusted gross
income must be less than:
$160,000 - Married Filing Jointly
$110,000 - Single, Head of Household, or Married Filing Separately
(and you did not live with your spouse during the year).
There is a partial phase out for married filing jointly beginning at
$150,000 and for others beginning at $95,000.
IRA Withdrawals to Pay Medical Expenses and Medical Insurance.
You generally pay a 10% penalty if you withdraw funds from your IRA
before a certain age. However, you may not have to pay the penalty if
the withdrawals are used to pay unreimbursed medical expenses that are
more than 7 1/2% of your adjusted gross income. If you lose your job,
you may be able to withdraw funds from your IRA without paying the 10%
penalty if the withdrawals are not more than the amount paid for medical
insurance for you and your family.
Health Insurance Deduction for Self-Employed Individuals.
Recent law changes increase the deduction for health insurance for
self-employed individuals (and more-than-2% employee-shareholders of S
corporations) to 100% for 2003 and thereafter.
Health Savings Accounts (HSA) and Medical Savings Accounts (MSA).
For small businesses and the self employed, an MSA is a tax-exempt
account established for the purpose of paying medical expenses in
conjunction with a high-deductible health plan. Like an IRA, an MSA is
established for the benefit of the individual, and is "portable". Thus,
if the individual is an employee who later changes employers or leaves
the work force, the MSA does not stay behind with the former employer,
but stays with the individual.
A small business for this purpose is defined as an employer who
employed an average of 50 or fewer employees during either of the two
preceding calendar years is considered a small employer.
A "high-deductible health plan" is a health plan that:
(1) has an annual deductible of at least $1,700, and not more than
$2,500, for individual (self-only) coverage; or
2) has an annual deductible of at least $3,350, and not more than
$5,050 for family coverage (coverage of more than one individual).
In addition, the annual out-of-pocket expenses under the plan cannot
exceed $3,350 for individual coverage and $6,050 for family coverage,
Out-of-pocket expenses include deductibles, co-payments and other
amounts the participant must pay for covered benefits, but do not
include premiums
HSAs are new for 2004. HSAs are similar to medical savings
accounts (MSAs). However, MSA eligibility has been restricted to
employees of small businesses and the self-employed while HSAs are open
to everyone with a high deductible health insurance plan. The only
limitation on the health plan is that the annual deductible must be at
least $1,000 for individual coverage and at least $2,000 for family
coverage
Contributions to the HSA by an employer are not included in the
individual's taxable income. Contributions by an individual are tax
deductible. Individuals, their employers, or both can contribute
tax-deductible funds each year up to the amount of the policy's annual
deductible, subject to a cap of $2,600 for individuals and $5,150 for
families. Individuals aged 55-64 can make additional contributions.
The interest and investment earnings generated by the account are
also not taxable while in the HSA. Amounts distributed are not taxable
as long as they are used to pay for qualified medical expenses. Amounts
distributed which are not used to pay for qualified medical expenses
will be taxable, plus an additional 10% tax will be applied in order to
prevent the use of the HSA for nonmedical purposes.
Like MSAs, HSA are portable. In addition, individuals over age 55 can
make extra contributions to their accounts and still enjoy the same tax
advantages. In 2004, an additional $500 can be added to the HSA. By
2009, an additional $1,000 can be added to the HSA.
Earned Income Credit. The maximum amount of earned income
credit you can receive for 2004 has increased to $390 for a taxpayer
without any qualifying children
Long-Term Care Insurance Contracts. Under the law, you can
exclude from gross income amounts received under a long-term care
insurance contract for long-term care services. You can also exclude
employer-provided coverage under a long-term care insurance contract.
Self-employed taxpayers can take long-term care insurance premiums into
account in calculating their health insurance deduction. Unreimbursed
long-term care services and long-term care insurance premiums are
treated as deductible medical expenses subject to current limitations.
Life Insurance Paid before Death of Insured. Certain payments
received under a life insurance contract on behalf of a terminally or
chronically ill individual (an accelerated death benefit) can be
excluded from your income.
Personal and Dependent Exemptions. There are two types of
exemptions:
• Personal exemptions for taxpayer and spouse
• Dependency exemptions for dependents
Personal and dependent exemptions reduce your taxable income. For
2004, each exemption equals $3,100. You may claim an exemption for
yourself, provided you cannot be claimed as a dependent on another
taxpayer's return, for your spouse if you file a joint return, or if you
do not file a joint return, provided your spouse has no gross income and
is not the dependent of another, and for each dependent child whose
gross income is less than $3,100, or for your child, notwithstanding his
or her gross income, provided the child is either a full-time student
under the age of 24 at the end of the year, or not yet 19 years old at
the end of the year.
If you have a child who is married, you may consider the option of
taking a dependent exemption for such child if he or she so qualifies as
just discussed and have the child file as "married filing separately."
In some cases, the benefit of claiming a dependent exemption may
outweigh the benefit of having the child file a joint return with his or
her spouse. We recommend that you take the time to figure out the tax
using each method in order to determine which way provides the lower
overall tax.
Personal exemptions are phased out for taxpayers with AGI in excess
of certain threshold amounts. For 2004, the exemption phase-out starts
when AGI exceeds $142,700 for singles, $214,050 for joint filers,
$178,350 for heads of household, and $107,025 for married couples filing
separately.
Married Filing Separately. If you are married and you file a
separate return, keep in mind that you must be consistent in claiming
the standard deduction or itemized deductions. In other words, if your
spouse itemizes deductions, then you also must itemize and cannot claim
the standard deduction, even if your total itemized deductions are
actually less than the standard deduction available to married persons
filing separately.
Limit on Itemized Deductions. Beginning in 1991, Congress
placed an additional "overall" limitation on the deductibility of a
certain group of itemized deductions. In 2004, this limitation applies
only if your adjusted gross income is greater than $142,700 ($71,350 if
married filing separately). Itemized deductions that are subject to this
limitation include taxes, home mortgage interest, charitable
contributions, and miscellaneous itemized deductions. The total of this
group of deductions must be reduced by 3% of the amount of your adjusted
gross income in excess of $142,700 ($71,350 if married filing
separately). This limitation is applied after you have used any other
limitations that exist in the law, such as the adjusted gross income
limitation for charitable contributions and the mortgage interest
expense limitations. Keep in mind that medical expenses, casualty and
theft losses, investment interest expense, and gambling losses are not
subject to this rule. The Economic Growth and Tax Relief Act of 2001
gradually eliminates this limitation beginning 2006.
The limitation is:
Reduced by one-third for 2006-2007 (i.e. itemized deductions will be
reduced by 2% of the excess of AGI over the threshold amount)
Reduced by two-thirds for 2008-2009 (i.e., itemized deductions will be
reduced by 1% of the excess of AGI over the threshold amount)
Repealed for 2010
Business and Travel Entertainment. The total amount of most
miscellaneous itemized deductions claimed on Schedule A of Form 1040
must be reduced by 2% of your adjusted gross income. In other words, you
can claim the amount of expenses that is more than 2% of your adjusted
gross income. Generally, only 50% of the amount spent for business meals
(including meals away from home overnight on business) and entertainment
will be deductible. This limit must be applied before arriving at the
amount subject to the 2% floor.
Charitable Contributions. In order to claim a deduction for a
charitable contribution of $250 or more made to a qualified organization
you are required to obtain a contemporaneous written acknowledgment of
your donation from such organization. Contemporaneous for this purpose
means that you must obtain the written acknowledgment on or before the
earlier of:
1. the date on which your return is actually filed, or
2. the due date for the return, including extensions.
A cancelled check will no longer constitute adequate substantiation
for a cash contribution of the amount. The written acknowledgment will
have to state the amount of cash and a description (but not the value)
of any property other than cash contributed. It must also state whether
or not the charitable organization provided any goods or services in
consideration for the contribution and, if so, a description and good
faith estimate of the value of goods or services provided. If the goods
or services provided as consideration for the contribution consist
solely of intangible religious benefits, a statement to that effect will
have to be included in the written acknowledgment.
Keep in mind that the primary responsibility lies with you, not the
charitable organization, to request and maintain in your records the
required documents for substantiation purposes.
Gross Income. One of the most important decisions you have to
make in determining your correct taxable income is what payments to
include. Keep in mind that a taxable payment is not limited to cash. It
may be property, stock, or other assets. Also, you must include in your
gross income the fair market value of payments in kind. For example, if
your employer provides you with a car that is used for both business and
personal purposes, then the value of the personal use of the car is
included in your earnings and is taxable to you. Or, assume you assist a
group of investors in purchasing a piece of real estate. In
consideration for your services, the investors award you an
unconditional percentage of ownership in the acquired asset, and you
have not invested any of your personal funds. The fair market value of
your ownership interest is considered as wages taxable to you in the
year of transfer.
Interest and Dividends. Interest that you receive on bank
accounts, on loans that you have made to others, or from other sources
is taxable. However, interest you receive on obligations of a state or
one of its political subdivisions, the District of Columbia, or a United
States possession or one of its political divisions, is usually
tax-exempt for federal tax purposes. Generally, the interest rates paid
on tax-exempt state and local obligations are lower than those paid on
taxable bonds. However, keep in mind that you may find these lower rates
attractive when you compare them with the after-tax yield from other
taxable instruments. For example, if you are in the 33% tax bracket, you
would need a 9% yield on a taxable bond to match a municipal bond with a
6.0% tax-exempt yield. The 2003 tax laws have changed the treatment of
dividends. They are taxed at the same lower rate as capital gains,
rather than as income.
How Capital Gains Are Taxed. Generally, the maximum capital
gains rate is now 15% (5% for individuals in the 10% or 15% bracket).
These capital gains rates apply to individuals, estates and trusts. A
capital asset need only be held "more than 12 months" in order to have
the lowest capital gain rate apply. The current law has a sunset
provision, so the rates may increase after 2008. This will also impact
dividends, which may again be taxed as income.
Limitations on the Deductibility of Travel and Entertainment
Expenses. Keep in mind that there are limits on the deductibility of
certain expenditures for travel, business meals, entertainment
activities, and entertainment facilities. For example, there is a 50%
deduction limitation for business-related meals, entertainment, and
entertainment facilities. In addition, there are special record-keeping
requirements imposed on taxpayers claiming deductions for these items.
Special rules also apply to deductions for cars and other property used
for transportation, foreign travel, and attendance at foreign locations.
Vehicle Expenses. If you began using a car, van, pickup, or
panel truck for business purposes, you may be able to deduct the
expenses you incur in operating the vehicle. You generally can use
either the actual expense method or the standard rate method to figure
your expenses. If you deduct actual expenses, you must keep records of
the cost of operating the vehicle, such as car insurance, interest,
taxes, licenses, maintenance, repairs, depreciation, gas and oil. If you
lease a vehicle, you must also keep records of these costs.
To avoid the burden of figuring actual expenses and of keeping
adequate records, you may be able to use the standard mileage rate to
figure the deductible cost of operating your vehicle. Keep in mind that
you can use the standard mileage rate only for a vehicle that you own.
For 2004, the standard mileage rate is 37.5 cents a mile for all
business miles. These amounts are adjusted periodically for inflation.
If you want to use this standard mileage rate, you must choose to use it
in the first year you place the vehicle in service for business
purposes. Then, in later years, you can choose to continue using the
standard mileage rate, or you may switch to the actual expense method.
Please refer to the new tax law section of the site for more details.
Club Dues. Dues paid for membership in professional
organizations, such as the AICPA (the American Institute of Certified
Public Accountants), AIA (the American Institute of Architects), or the
ABA (American Bar Association), or public service organizations, such as
the Rotary or Kiwanis clubs, may be deductible if paid for business
reasons and the organization's principal purpose is not the conduct of
entertainment activities. No deduction is allowed for club dues or
assessments paid for membership if the club is organized for business,
pleasure, recreation, or social purposes. These clubs include any
organization whose principal purpose is the entertainment of its members
or guests. The character of an organization is determined by its
purposes and activities, not by its name. For example, dues and fees
paid to athletic clubs, sporting clubs, country clubs, airline clubs,
and hotel clubs are not deductible. Keep in mind that specific business
expenses, such as meals and entertainment that occur at a club, are
deductible to the extent that they otherwise satisfy certain
deductibility standards.
Recordkeeping. Travel and entertainment expenses that are an
ordinary and necessary part of your business may not be deducted, unless
you meet specific substantiation requirements. The tax law specifically
disallows an otherwise allowable deduction for any expense for
traveling, entertainment, gifts or listed property, unless these
expenses are substantiated either through "adequate records" or
"sufficient evidence corroborating the taxpayer's own statement."
Maintaining "adequate records" is clearly the preferable approach. This
rule also applies to deductions for entertainment facilities.
You are required to maintain documentary evidence, such as a diary,
log, statement of expense, account book, or similar business records,
for (1) any lodging expenditure, and (2) any other expenditure of $75 or
more .
Selling Your Home. An individual may exclude from income up to
$250,000 of gain ($500,000 on a joint return in most situations)
realized on the sale or exchange of a residence. The individual must
have owned and occupied the residence as a principal residence for an
aggregate of at least two of the five years before the sale or exchange.
The exclusion may not be used more frequently than once every two years.
The required two years of ownership and use need not be continuous. The
test is met if the individual owned and used the property as a principal
residence for a total of 730 days (365 days X 2) during the five-year
period before the sale. Short temporary absences for vacations or
seasonal absences are counted as periods of use, even if the taxpayer
rents out the property during those periods.
Home Mortgage Interest. Acquisition indebtedness is debt
incurred in acquiring, constructing, or substantially improving a
qualified residence and secured by such residence. Any such debt that is
refinanced is treated as acquisition debt to the extent that it does not
exceed the principal amount of acquisition debt immediately before
refinancing. Home equity indebtedness is all debt (other than
acquisition debt) that is secured by a qualified residence to the extent
it does not exceed the fair market value of the residence reduced by any
acquisition indebtedness. Interest on such debt is deductible even if
the proceeds are used for personal expenditures.
Owning More Than Two Homes. If you own more than two homes,
keep in mind that you may not deduct the interest on more than two of
these homes as home mortgage interest during any one year. You must
include your main residence as one of the homes. You may choose any one
of your other homes as a qualified residence and may change this choice
in a different tax year. However, you cannot choose to treat one home as
a second residence for part of a year and another home as a second
residence for the remainder of the year if both of these homes were
owned by you during the entire year and neither was your main residence
during that year.
Points. Points are certain charges sometimes paid by a
borrower. They are also referred to as loan origination fees, maximum
loan charges, loan discount, or discount points. If the payment of any
of these charges is only for the use of money, it is interest. Because
points are, in effect, interest paid in advance, generally you may not
deduct the full amount for points in the year paid. Points that
represent prepaid interest generally must be deducted over the life of
the loan. However, you may be able to deduct the entire amount you pay
as points in the year of payment if the loan is used to buy or improve
your principal residence, is secured by that home, and certain other
tests apply.
Home Office Expenses. To qualify for a deduction for home
office expenses you must use the home office exclusively as an office,
and it must be your primary place of business. In determining whether
you meet this standard, you must look at:
1. the relative importance of the activities performed at each
business location;
2. the amount of time spent at each location.
The IRS has indicated that it will first look to the "relative
importance" test. If this test does not produce a definitive answer,
then the amount of time spent at each location is the determining
factor. This test may result in a taxpayer having no specific office
which can be deemed the principal place of business and, thus, being
denied a deduction for home office expenses.
The allowable deduction is limited to the gross income generated from
the use of the residence, reduced first by any expenditures otherwise
deductible, such as taxes and interest, and then reduced by other
deductible trade or business expenses, such as prorated utilities and
depreciation. Any disallowed expenses can be carried forward to future
years, subject to the gross income limitation in those years.
Deferring Gains and Accelerating Losses. Generally it is
preferable to defer gains and accelerate losses for the simple reason
that the later the taxes are paid, the longer you have the use of the
money. In addition, when you recognize a gain or loss it can also affect
the tax benefits of your itemized deductions and exemptions. That's
because capital gains and losses are included in figuring your adjusted
gross income. Therefore, your capital gains and losses affect the
calculation of your itemized deductions and personal exemptions which
are phased out after your income reaches a certain level. Miscellaneous
itemized deductions are deductible only to the extent that they exceed
2% of your adjusted gross income. Medical expenses are deductible only
to the extent that they exceed 7.5% of your adjusted gross income.
Capital gains income therefore also has an impact on both of these
calculations. Depending on your itemized deductions, the time at which
you recognize a capital gain or loss can have a significant impact on
your taxes.
Worthless Securities. The deduction for a worthless security
must be taken in the year in which it becomes worthless, even if it is
sold for a nominal sum in the following year. If you do not learn that a
security has become worthless until a later year, you should file an
amended return for the year in which it became worthless. Since it may
be difficult to determine exactly when a stock becomes worthless, the
capital loss deduction should be claimed in the earliest year in which
such a claim may be reasonably made. Keep in mind that you should keep
any documents indicating the date on which the security becomes
worthless. Examples of sufficient documentation are bankruptcy documents
and financial statements.
Vacant Rental Property. You may deduct expenses on your rental
property during a period in which it is not being rented as long as it
is actively being held out for rent. This rule applies to a period
between rentals as well as to the period during which a property is
being marketed as a rental property for the first time. The IRS can
disallow these deductions if you are unable to show that you were
actively seeking a profit and had a reasonable expectation of achieving
one. However, the deduction cannot be disallowed merely because your
property is difficult to rent.
Federal Income Tax Rates
Preliminary 2004 Tax Rate Schedules
|
If
TAXABLE INCOME
|
|
Than
the TAX Is
|
|
|
Is
Over
|
But
Not Over
|
|
This
Amount
|
Plus
This %
|
|
Of the Excess Over |
|
SCHEDULE X —
|
|
Single
|
|
$0 |
$7,150 |
|
$0.00 |
10% |
|
$0.00 |
|
|
$7,000 |
$29,050 |
|
$715.00 |
15% |
|
$7,150 |
|
|
$29,050 |
$70,350 |
|
$4,000.00 |
25% |
|
$29,050 |
|
|
$70,350 |
$146,750 |
|
$14,325.00 |
28% |
|
$70,350 |
|
|
$146,750 |
$319,100 |
|
$35,717.00 |
33% |
|
$146,750 |
|
|
$319,100 |
--
|
|
$86,328.00 |
35% |
|
$319,100 |
|
SCHEDULE Y-1 — |
|
|
Married Filing Jointly
or Qualifying
Widow(er)
|
|
$0 |
$14,300 |
|
$0.00 |
10% |
|
$0.00 |
|
|
$14,300 |
$58,100 |
|
$1,430.00 |
15% |
|
$14,300 |
|
|
$58,100 |
$117,250 |
|
$8,000.00 |
25% |
|
$58,100 |
|
|
$117,250 |
$178,650 |
|
$22,787.50 |
28% |
|
$117,250 |
|
|
$178,650 |
$319,100 |
|
$39,979.50 |
33% |
|
$178,650 |
|
|
$319,100 |
--
|
|
$86,328.00 |
35% |
|
$319,100 |
|
SCHEDULE Y-2 — |
|
|
Married Filing
Separately |
|
$0 |
$7,150 |
|
$0.00 |
10% |
|
$0.00 |
|
|
$7,150 |
$29,050 |
|
$715.00 |
15% |
|
$7,150 |
|
|
$29,050 |
$58,625 |
|
$4,000.00 |
25% |
|
$29,050 |
|
|
$58,625 |
$89,325 |
|
$11,393.75 |
28% |
|
$58,625 |
|
|
$89,325 |
$159,550 |
|
$19,989.75 |
33% |
|
$89,325 |
|
|
$159,550 |
--
|
|
$43,164.00 |
35% |
|
$159,550 |
|
SCHEDULE Z — |
|
|
Head of Household
|
|
$0 |
$10,200 |
|
$0.00 |
10% |
|
$0.00 |
|
|
$10,200 |
$38,900 |
|
$1,020.00 |
15% |
|
$10,200 |
|
|
$38,900 |
$100,500 |
|
$5,325.00 |
25% |
|
$38,900 |
|
|
$100,500 |
$162,700 |
|
$20,725.00 |
28% |
|
$100,500 |
|
|
$162,700 |
$319,100 |
|
$38,141.00 |
33% |
|
$162,700 |
|
|
$319,100 |
--
|
|
$89,753.00 |
35% |
|
$319,100 |
|
|
Tax planning is an activity that is
best pursued year-round. You can use the following
list of activities and dates to help you better carry out
your planning on a regular and ongoing basis.
|
First Quarter |
- Complete Form
W-4 and adjust withholding if needed.
- Pay
fourth-quarter estimated tax voucher for the
preceding tax year by January 15.
- Evaluate
before-tax contributions to retirement plans.
- Evaluate
voluntary after-tax contributions to retirement
plans.
- Apply for a
Social Security number for any child who does
not have one.
- Make quarterly
defined benefit Keogh contribution for preceding
year by January 15.
|
|
Second Quarter |
- Comply with
minimum distribution rules for qualified plans
by April 1 if you attained age 70½ in previous
year.
- File individual
tax return (or an application for an extension
of time to file) by April 15.
- Pay
first-quarter estimated tax, using the correct
voucher, by April 15.
- Make
previous-year IRA contribution by April 15.
- Make
previous-year Keogh plan contribution by April
15 (unless you applied for an extension of time
to file your tax return).
- Make quarterly
defined benefit Keogh contribution for the
current year by April 15.
- Pay
second-quarter estimated tax voucher by June
15.
|
|
Third Quarter |
- Make quarterly
defined benefit Keogh contribution for the
current year by July 15.
- File Form 5500
Annual Report of Employee Benefit Plan by July
31, if applicable.
- If you applied
for an extension of time to file your preceding
year's tax return, file the return or an
additional extension request by August 15.
- Pay
third-quarter estimated tax voucher by September
15.
|
|
Fourth Quarter |
- If you got an
extension of time to file later than August 15,
you must file by October 15.
- Make your
quarterly defined benefit Keogh contribution for
the current year by October 15.
- Begin your
year-end planning:.
- Evaluate the
applicability of the AMT and other taxes.
- Adjust
withholding, if necessary.
- Evaluate
year-end capital transactions.
- Establish a
separate Keogh plan for self-employment income.
- Comply with
minimum distribution rules for qualified plans.
|
|
Throughout the Year |
- Evaluate your
tax and financial strategy for receiving
discretionary and mandatory retirement plan
distributions.
- Reevaluate your
uses of debt.
- Consider making
gifts to children or other family members up to
the annual gift tax exclusion of $11,000 per
gift per donee per year.
- Evaluate passive
loss exposure and potential investment shifts.
- If you have
excess cash flow, consider how to invest those
funds.
- Optimize mix of
interest expense items.
- Consider making
charitable contributions of property, instead of
(or in addition to) giving cash.
- Consider ways to
fund your children's education.
- Evaluate your
mix of portfolio and passive income.
- Review prior
gifts to children under age 14 and their incomes
in order to minimize the amount of income that
will be taxed at your rate.
- Review the
selection of your second residence and status of
your vacation home.
|
|
|
The most up to date versions of common
IRS tax forms for the 2004 tax year are available in PDF
format. To view and print PDF files, you'll need the
freely available Adobe Acrobat reader software, which can be
downloaded at the Adobe site by clicking
here.
|
The most up to date versions of the
following common IRS publications for the 2004 tax year are
available in PDF format. To view and print PDF files,
you'll need the freely available Adobe Acrobat reader
software, which can be downloaded at the Adobe site by
clicking
here.
|
|
Form |
Description |
|
1 |
Your
Rights as a Taxpayer |
|
3 |
Armed Forces Tax Guide |
|
4 |
Student's Guide to Federal Income Tax |
|
5 |
Your
Appeal Rights and How To Prepare a Protest If
You Don't Agree |
|
17 |
Your
Federal Income Tax (for individuals) |
|
225 |
Farmers Tax Guide |
|
334 |
Tax
Guide for Small Business |
|
378 |
Fuel
Tax Credits and Refunds |
|
463 |
Travel, Entertainment, Gift, and Car Expenses |
|
501 |
Exemptions, Standard Deduction, and Filing
Information |
|
502 |
Medical and Dental Expenses |
|
503 |
Child and Dependent Care Expenses |
|
504 |
Divorced or Separated Individuals |
|
505 |
Tax
Withholding and Estimated Tax |
|
508 |
Education Expenses |
|
509 |
Tax
Calendars |
|
514 |
Foreign Tax Credit for Individuals |
|
516 |
U.S.
Government Civilian Employees Stationed Abroad |
|
517 |
Social Security and Other Info for Members of
the Clergy |
|
519 |
U.S.
Tax Guide for Aliens |
|
520 |
Scholarships and Fellowships |
|
521 |
Moving Expenses |
|
523 |
Selling Your Home |
|
524 |
Credit for the Elderly or the Disabled |
|
525 |
Taxable and Nontaxable Income |
|
526 |
Charitable Contributions |
|
527 |
Residential Rental Property |
|
529 |
Miscellaneous Deductions |
|
530 |
Tax
Information for First-Time Homeowners |
|
531 |
Reporting Tip Income |
|
533 |
Self-Employment Tax |
|
534 |
Depreciating Property Placed in Service Before
1987 |
|
535 |
Business Expenses |
|
537 |
Installment Sales |
|
541 |
Partnerships |
|
544 |
Sales and Other Dispositions of Assets |
|
547 |
Casualties, Disasters, and Thefts |
|
550 |
Investment Income and Expenses |
|
551 |
Basis of Assets |
|
552 |
Recordkeeping for Individuals |
|
553 |
Highlights of Recent Tax Changes |
|
554 |
Older Americans Tax Guide |
|
555 |
Community Property |
|
556 |
Examination of Returns, Appeal Rights, and
Claims for Refund |
|
559 |
Survivors, Executors, and Administrators |
|
560 |
Retirement Plans for Small Business |
|
561 |
Determining the Value of Donated Property |
|
570 |
Tax
Guide for Individuals With Income From U.S.
Possessions |
|
575 |
Pension and Annuity Income |
|
584 |
Nonbusiness Disaster, Casualty and Theft Loss
Workbook |
|
587 |
Business Use of Your Home |
|
590 |
Individual Retirement Arrangements |
|
593 |
Tax
Highlights for U.S. Citizens and Residents Going
Abroad |
|
594 |
Understanding the Collection Process |
|
595 |
Tax
Highlights for Commercial Fishermen |
|
596 |
Earned Income Credit |
|
901 |
U.S.
Tax Treaties |
|
907 |
Tax
Highlights for Persons with Disabilities |
|
908 |
Bankruptcy Tax Guide |
|
910 |
Guide to Free Tax Services |
|
911 |
Direct Sellers |
|
915 |
Social Security and Equivalent Railroad
Retirement Benefits |
|
919 |
How
Do I Adjust My Tax Withholding? |
|
925 |
Passive Activity and At-Risk Rules |
|
926 |
Household Employer's Tax Guide |
|
929 |
Tax
Rules for Children and Dependents |
|
936 |
Home
Mortgage Interest Deduction |
|
946 |
How
to Depreciate Property |
|
947 |
Practice Before the IRS and Power of Attorney |
|
950 |
Introduction to Estate and Gift Taxes |
|
967 |
IRS
Will Figure Your Tax |
|
968 |
Tax
Benefits for Adoption |
|
969 |
Medical Savings Accounts |
|
970 |
Tax
Benefits for Higher Education |
|
971 |
Innocent Spouse Relief |
|
972 |
Child Tax Credit |
|
1244 |
Employees Daily Record of Tips and Report to
Employer |
|
1542 |
Per
Diem Rates |
|
1544 |
Reporting Cash Payments of Over $10,000 |
|
1546 |
The
Problem Resolution Program of the Internal
Revenue Service |
|
For
the complete selection of downloadable forms,
click
here to go to the IRS forms page. |
|
|
This material is designed to
provide accurate and authoritative information with regard to
the subject matter covered. It is made available with the
understanding that the publisher is not engaged in rendering
legal, accounting, or other professional services without a
written contract between the reader and our firm. If legal
advice or other expert assistance is required, the services of a
competent professional person Such as Edward J. Barker, CA
should be sought.
|