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November 2009
Don’t Self-Diagnose…Toast Year-End With Your Trusted Advisor
By George Bohle

     ’Tis the season for best-intentioned to make tactical mistakes affecting their taxes, retirement and overall business planning. They are bombarded with year-end tax-saving strategies distributed via newspaper, television and even personal friends who have “a friend” who did it this way. They self-diagnose, applying those strategies to their own situations, and, in most cases, misapplying them, not achieving the outcome they had anticipated.

     Despite the flurry of valuable year-end tax-saving tips, the most valuable tax-saving tip may be to get together with your trusted tax advisor.

     Merely reading brief descriptions of tax-saving strategies, trying to understand them and then apply them without a thorough knowledge of the current tax code, is almost impossible. Trusted advisors such as accountants, attorneys and financial planners—professionals who deal in these matters everyday—are best qualified to assist you in the evaluation and application of these ideas to your personal situation in order to maximize your benefit.

     For example, some of the items an individual should discuss with an advisor may include:

     Postponing income until 2010 and accelerating deductions into 2009 to lower your 2009 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2009 that are phased out over varying levels of adjusted gross income (AGI). Perhaps it may be advantageous to try to arrange with your employer to defer a bonus that may be coming your way until 2010. Timing of income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances.    Note, however, that in some cases, it may pay to actually accelerate income into 2009. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or if subject to the  Alternative Minimum Tax (AMT).

     Realizing losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, and then buy back the same securities at least 31 days later.

     If you believe a Roth IRA is better than a traditional IRA, and want to remain in the market for the long term, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2009. As an option, convert in early 2010, when the conversion limitation is more easily met, while still achieving the same long-term tax-free benefits of a Roth.

     You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions.

     You can save gift and estate taxes by making gifts sheltered by the annual gift tax exclusion before the end of the year. You can give $13,000 in 2009 to an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next.

     Depending on your particular situation, you may also want to consider deferring a debt-cancellation event until 2010, electing to deduct investment interest against capital gains, and disposing of a passive activity to allow you to deduct suspended losses.

     High-income-earners have other factors to keep in mind when mapping out year-end plans. Many observers expect top tax rates on ordinary income to increase after 2010, making long-term deferral of income less appealing. Long-term capital gains rates could go up as well, so it may pay for some to take large profits this year instead of a few years down the road. On the other hand, the solid good news high-income-earners have to look forward to next year is that there no longer will be an income-based reduction of most itemized deductions, nor will there be a phase-out of personal exemptions.

     For businesses, some tax deductions will be available through the end of this year unless Congress passes additional legislation: 50 percent bonus first-year depreciation for most new machinery, equipment and software; an extraordinarily high $250,000 expensing limitation; the research tax credit and the 15-year write-off for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.

     Very important and often overlooked items related to business year-end tax planning are understanding your basis in your partnership or S corporation so you can deduct losses from it for this year. Often a gentle reminder from an advisor to consider using a credit card to prepay expenses that can generate deductions for this year is well worth the discussion.

     As you can tell from the short list above, there are many tax savings ideas for individuals and businesses that in most cases are applicable to everyone. But these are highly complex issues that must be handled properly for you to obtain maximum benefit.

     So I encourage each and every one of you to end your year on a high note and toast the year-end with your trusted advisor to discuss your tax-saving strategies. Once the clock strikes midnight on December 31st, many planning options will be foreclosed and you may not be celebrating with champagne when your tax bill arrives.

     George W. Bohlé Jr. is a managing partner at Blair, Bohlé & Whitsitt, PLLC, a CPA firm that provides accounting, assurance, tax compliance and planning services in addition to strategic planning and tax minimization strategies to privately held businesses. Contact him at 704-841-9800 or visit

Gerorge W. Bohle Jr. is a managing partner at Blair, Bohle & Whitsitt, PLLC, a CPA firm.
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