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Jody’s right, let’s plan the new year…

October 8, 2010

Every year around this time my older sister, Jody (she’ll probably be upset I referred to her as my older sister, as when we get to a certain age some don’t like to clarify…) mentions during one of her weekly calls that she has prepared her housekeeping budget for the coming year. Ever since I started my own tax & bookkeeping firm, years ago, my family members have always given me their report card of how they operate their finances; I smile and always encouraged them along the way. Jody was always the family member that used graphs, sharpies, and the occasional post it until she learned excel, then watch out! In all honesty I was proud of her because she always did one of those pre- tax- plan-ish items that we in the business call tax planning before anyone prompted her. Of course years of osmosis is the reason….LOL

BUT there are things you can do now to save taxes in 2010. If you want to keep your 2010 taxes as low as possible, the best way is to develop a plan early; here are a few suggestions.

Establish your record keeping (Jody’s housekeeping budget) system early. When you do this early enough you find out when you are falling behind (no worries, we always do) and can try to fix it (or catch up). You can also keep track of records that you would need, and have plenty of time to gather them.

Seek alternatives to personal interest loans. As you know personal interest and credit card interest is not a write off (business returns are a different in that they can write off interest related to their business), it becomes a horrible waste of money. The interest you pay on your home equity mortgage (for your principal residence) is still 100% deductible.

Review your tax returns for the past three years. Aside from possibly missing something you filed earlier, you are able to amend up to three years from filing to get refunds. Reviewing them is also a great way for future tax planning and a refresher course in what to keep an eye out for as you go thru the year, or end your year.

Re- examine your rental income investments, if you have them. Reevaluate whether you should keep your rental real estate investments if you can’t deduct losses. This involves your adjusted gross income and the amount of loss the IRS allows. Call me as we can go over the rules 212-979-6830.

Review your employee benefits. Most companies offer a range of benefits under a “cafeteria plan.” If you have young children, you may need employer paid dependent care. If you are over the age of 50 you may prefer long term care insurance. And depending what else is in the cafeteria plan, much could affect you by making the right choices.

Maxing out your 401k plan and IRA’s are still a good thing even in a faulty economy where we find we need every penny we make to survive.

Jody is right to look at where the dollars go and how you can maximize all that you have. Give us a call or stop by for a free consultation so we can help you make the current year end easy and the upcoming year fruitful. Visit our website at www.gunwel.com. See you soon!

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