Make Charitable Contributions
Consider making charitable contributions before year-end both to obtain the maximum tax deduction and to fulfill any charitable programs or commitments you may have established.
Buy a New Car
If you need a new car, now is the time to purchase or lease. Frequently, dealers are anxious to clear out last year’s inventory prior to year-end. In making your choice, consider the federal tax (and occasional state tax) advantages for buying fuel-efficient vehicles.
Examine Investments
Examine your current investments to determine those with unrealized losses. Consider selling those investments to take the loss this year. You can deduct up to $3,000 in capital losses in excess of capital gains. However, do not let the tax savings outweigh the investment potential. You might consider "swapping" for a similar company in the same industry if you like the potential of the industry.
Pay Tax-Deductible Expenses
Consider paying tax-deductible expenses prior to year-end. Some common examples are real estate taxes, quarterly state or local income taxes, investment-related expenses, dues. These must be paid by December 31 to obtain a deduction this year. Professional guidance will be helpful here.
Evaluate Your Progress
Evaluate your progress for the year. How close were you to your budget? Recalculate your net worth. Compare it to the value at the beginning of the year. How did you do?
Tax Due Dates for December 2006
December 11th; Employees who work for tips: If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.
December 15th; Corporations: Deposit the fourth installment of estimated income tax for 2006. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
Employers: Social security, Medicare, and withheld income tax – If the monthly deposit rule applies, deposit the tax for payments in November.
Employers: Nonpayroll withholding – If the monthly deposit rule applies, deposit the tax for payments in November.
A list of Financial Planning Do’s & Dont’s
Here are a few financial planning suggestions that can add to your peace of mind about financial matters and simplifying your life:
- At least once a year, write down your investment goals and what strategy you will use to reach them. This will keep you focused.
- Instead of giving money to many different charities, pick a few that are important to you, and give them a larger amount. This type of directed giving not only makes more sense, but will make it easier to track your donations at tax time.
- Inventory your household possessions, with a camera or camcorder if you desire. Keep the inventory at work or in a safe-deposit box. This inventory will help should you need to submit a homeowner’s insurance claim.;
- Use one insurance agent and one financial adviser for your transactions.
- If you have doubts about entering into a transaction, don’t do it. You’ll probably save yourself money, time, and aggravation.
About Chuck Chuckuemeka [1]
Chuck is managing partner of Chuckuemeka & Associates, a nationally focused CPA firm specializing in Accounting, Auditing, Consulting and Tax Advising.
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