By CHRISTINA M. CURRIE
Daily Press writer
In the midst of hectic holidays, most people are counting the days until Christmas, not the days until tax season.
But, in the 17 days remaining before 2002, people can be working to trim their 2001 tax bill. Uncle Sam will be paying a visit to your pocketbook in April, and now's the time to loosen his grasp. Going over your finances could pay off with a smaller tax bill come April 15.
The first step, local accountants advise, is get together all tax-associated paperwork and determine an estimated tax. For those who owe the Internal Revenue Service money, there are steps they can take to lower that amount, if they work quickly.
"Start gathering records now so you can know if you're going to need to do any of these things, so estimate your tax payment," said Accountant Cory Leiker.
Major tax legislation was passed this year, so talk to a tax advisor to be sure you're taking advantage of all possible tax breaks. Ask if the following trategies are appropriate:
The Spirit of Giving
Millions of Americans donated to relief efforts following the Sept. 11 attacks, but local charities are feeling a pinch. The Interfaith Food Bank has requested emergency funds from the Moffat County United Way to fill Christmas baskets and Advocates-Crisis Support Services is teaming with KRAI 55 County in a cash and clothing drive to replenish its dwindling supplies.
"Now's a perfect time to give money and it doesn't just have to be money. It can be goods as well. Clean out the closets and donate to the budget center," Leiker said. "Not only are you filling a need, you'll get a deduction."
Charitable donations can be deducted on a tax return. Gifts made by credit card can be deducted this year as long as the transaction goes through by Dec. 31. Be sure to get a receipt for any donations over $250.
"Keep track of what you gave and what it's worth," Leiker said.
If you give appreciated assets such as stock, you get a double-whammy tax bonus. You can deduct the full market value of the donation and avoid capital gains tax on the appreciation.
Leiker also recommends donating old vehicles, either to a high school shop program or to the Kidney Foundation. The value of the vehicle can be deducted from your taxes.
According to Leiker, the most important thing is to get a receipt for all donations.
Take Your Losses
If you have losing investments in your portfolio, consider selling them and taking the loss. You can use losses to offset capital gains dollar for dollar. After all gains have been offset, you can apply up to $3,000 in losses against ordinary income. Excess losses can be carried forward and applied in future years.
"People should consider whether to sell stock to take advantage of capital losses charted," said Jack Bonaker, certified professional accountant.
This year is a good year to take advantage of capital losses, Bonaker said, because it has been a bad year on the stock market.
Put Off Payday
If you're expecting a big chunk of dough at the end of the year, such as a commission check or year-end bonus, consider requesting that it be delivered in January instead so you won't have to pay taxes on it until next year, if there is a chance that income tax rates decrease. In order for those earnings to be taxable for 2002 instead of 2001, the check must be dated after Jan. 1, Leiker said.
Assuming it can be done legally, she says it's a great way to balance your tax burden.
"If you hold a check, it gives you time to plan," she said.
Leiker doesn't recommend that people count on big tax cuts next year.
"That's not something you can depend on with the economy the way it is," Leiker said. "I would not guarantee, I wouldn't even plan on a tax cut for next year. A lot of promised tax cuts may not come to pass because of changes in the economy. There may well be an increase if things continue the way they are now."
Bunch Deductible Expenses
Medical and dental expenses can be deducted if they exceed 7.5 percent of a person's adjusted gross income. This category of deductions includes health insurance premiums, the cost of eyeglasses and contact lenses and payments for stop-smoking programs. Anyone nearing the 7.5 percent threshold might want to schedule and pay for elective doctor and dentist visits before year end.
Businesses who want to lower their tax burden should consider whether to
purchase equipment before Jan. 1, Bonaker said.
Businesses can deducted the value of equipment from their estimated payment.
"You can always buy equipment you planned to buy after the first of the year if you expect to have a balance due," Leiker said.
"This is all kind of simplistic," Bonaker said. "One size doesn't fit all."
He suggests that anyone with concerns consult a professional. Those who plan to make some end-of-the-year changes should do so immediately.
For those who will just hang on and file without taking advantage of pre-new year deductions should make an appointment with a professional before the tax season crunch starts. Leiker recommends people consult an accountant by the last week of January. Bonaker said that most accountants are booked after April 1.