Tips for Tax Planning 2017
Considerations for tax planning are important throughout the entire year
and not just at tax time. Under a new federal administration, 2017 may
have significant tax law changes, so tax planning could be especially
invaluable this year. The following tips should be considered by all taxpayers.
Maintaining updated records throughout the year can make income tax return
preparation less painful. If you maintain multiple accounts at various
financial institutions, keep one list of the banks and account numbers.
When closing an account, make sure the bank has your current address to
ensure you receive a 1099. Keep the last statement handy in case a 1099
is not correctly issued. Label envelopes at the beginning of each year
to keep receipts for tax deductions such as charitable donations, taxes
Tax Adjustment Notices
If you receive a notice from the IRS or Franchise Tax Board (FTB), act
on it quickly. It is difficult to contact taxing authorities, so you may
want to consider accepting the adjustment and paying the notice amount
to avoid frustration. If you do contact the IRS or FTB, have with you
the notice, applicable tax return and items necessary to discuss the issue.
You may need to fax or mail support to the contact person to confirm your
conversation. After resolving a notice, determine if any other tax returns
or years will be impacted by the notice.
Make sure your sources for tax planning are reliable. Many articles on
the Internet are simply an opinion versus fact. Before making a financial
decision, check with your tax advisor. A decision can create a domino
effect negating the expected results.
Some investments include contracts, such as annuities and life insurance.
Understand the current and future tax consequences before signing the
contract. What is the cost for canceling the contract before maturity?
What is the expected overall return? What happens on death? What are the
tax consequences should you decide to gift it?
At the beginning of each year, record important dates on your calendar
for your tax return. Such dates include income tax payment due dates,
gifting, drawing required minimum distributions and/or maturity of a CD.
At the end of the year, the calendar can be a great resource of information
for tax planning.
Tax Law Changes
More than likely we will see federal tax changes this year. The expected
changes include reduction of tax rates, limitations on certain itemized
deductions, elimination or adjustment to estate tax, as well as increased
tax savings for two-earner families with children. Until these changes
are enacted, it will be difficult to determine the financial impact to
taxpayers. Keeping organized and updated records throughout the year will
make it easier to do tax planning once the new laws are enacted.
For additional financial health information, please attend Torrance Memorial's
Financial Health Seminars.
Scott Donnelly is a CPA and Partner with PDM CPAs in Torrance. He is a
member and Co-Chair of Torrance Memorial’s Professional Advisory Council.
www.pdmcpas.com. (310) 802-7832.