Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Done with taxes?  Time to think about next year

- by Alan Duvall 

Published in Dayton Daily News April 16, 2006 

Review Pension and IRA opportunities to ensure contributions are maximized. 

The tax filing deadline has passed – well, actually its been extended to tomorrow due to the weekend. 

Time to forget about taxes for a while? 

Unfortunately no.  Now is really the time to reflect on your tax situation and plan for the coming year. 

Lottery news with 2005 refunds?  Perhaps, but refunds may simply mean you prepaid taxes in effect giving the government an interest-free loan.  Consider adjusting tax payments to minimum amounts required to avoid penalties.  Cumulative year tax payments equal to prior year total liabilities generally provide penalty protection even if a payment is due next April 15.   

Study 2005 returns for tax reduction opportunities.  Deductions lost to limitation rules can be resuscitated with proper planning. 

Restructure loans to eliminate non-deductible personal interest.  Residence refinancing and equi-lines are options. 

Tax deductions are frequent victims of the horrid Alternative Minimum Tax.  Bunching techniques consisting of acceleration or delay of year-end payments may avoid painful consequences. 

Review pension and IRA opportunities to insure contributions are maximized.  Retirement plans remain the primary source of investment liquidity in this country and often pave the path towards personal savings discipline. 

Many tax benefits lay in wait for those providing nursing, health care and education needs for parents and children.  Explore alternative means of funding future obligations to have Uncle Sam foot a portion of familial obligations.  Such planning can even involve allocation of income among family members to take advantage of lower tax rates. 

Consider seeking professional advice should a major purchase or sale of assets or investments seem imminent.  Legal devices such as like-kind exchanges can defer gain recognition and planning may maximize shift of ordinary income to beneficial capital gains.  Numerous tax traps await those who plunge naked into unexplored waters.    

Documentation of tax transactions is a constant torment to taxpayers.  Such efforts are most effective when conducted simultaneous to the event.  Reconstruction of transactions a year after the event can be a particular obscenity-laced moment.  

Proper tax planning should be a continual process.  There is minimal opportunity to reduce taxes when a shoebox is handed to your professional months after year-end. 

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.