Year End Tax Tips
December 24, 2011 by staff
Year End Tax Tips, Tightening up loose ends is important, especially when it comes to year-end tax planning. In Litchfield County, some certified public accountants (CPAs) offered their expertise on steps to consider as 2011 comes to a close.
Joe Hanggi of Hanggi & Company CPAs LLC in New Preston called tax planning a very individualized situation.
A key issue for many to consider involves individual retirement accounts (IRAs).
Maximizing contributions to IRAs is typically recommended, and any changes to plans, such as the level of a paycheck deduction, should be done by Dec. 31.
The consideration would be different for those who see their incomes change from one year to the next. “If you were to take an IRA deduction and your income was low enough that you didn’t get a deduction, you might want to defer to another year if your deduction is going to be higher,” said Mr. Hanggi.
And if people cash in retirement plans early, or before age 59 and a half, there is a 10 percent premature distribution penalty. “That’s something people forget all the time,” he said.
For those looking to offset the tax impact of higher incomes, Mr. Hanggi recommends postponing income until 2012 if possible.
Another standard redress is accelerating deductions in 2011. Residents, for example, can pay their real estate taxes early, or can make state estimated tax payments by Dec. 31 to get them booked in the 2011 tax year.
Other suggestions include realizing stock losses to offset gains. Once losses offset the tax impact of gains, filers can apply up to $3,000 in losses against their regular income. “The remainder of the losses are carried over into the future beyond that point,” said Mr. Hanggi.
Addressing another matter, he said, “There is still uncertainty whether Congress will have further tax legislation. There are some things that could be extended or changed and we don’t know the real answer yet.” He cited the payroll tax deduction that is at the forefront in the news, with President Barack Obama urging Congress to pass an extension by the end of the year, so taxes will not rise on 160 million Americans.
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