‘Do them now’ moves

Ignorance is never better than knowledge.

-Enrico Fermi

A couple of weeks ago, I sent you a list of upcoming changes for 2011, from a tax perspective.

And I got a few emails from clients and friends who said, “Rowel, thanks for this–but what can I *do* now to minimize my exposure?”

Well, first of all–I want you to know that I read every email I get, and that you may ALWAYS respond to these emails with questions (yes, believe it or not, some lawyers never respond to email, so I need to emphasize that we’re different!). Secondly, while I’m not a CPA, I do know a thing or two about tax issues for my clients.

Yet in all of my years paying attention to the tax code, I don’t quite remember a time like this–with so much up in the air, and the political climate looking like it could shift significantly. It’s as if we’re all in a period of “stasis” until November 3rd–when we’ll see where lawmaking will be headed.

That said, there ARE certain things we *do* know. Like the fact that taxes WILL be rising in 2011. So with that in mind (and so that all of my clients and friends can see what I think you should be doing), I’ve put together a series of “do-it-now” tax moves, as well as some to be considering over the next month or so.

[I realize that for some of my clients, all of this is irrelevant. Tough times, fixed incomes, etc. But I hope that if that's you, you'll forgive my addressing those of my clients who are facing more "complex" financial decisions this year. After all--our philosophy is that YOU know best how to spend YOUR money. Which is why we work so hard to help you have more say over it.]

I think these will really help…

Rowel Manasan’s

“Straight Talk” Personal Strategy

Do-It-Now Tax Moves, And More

Since so many tax issues are up in the air right now, you should organize your tax moves into three categories: those you should do now, those you can decide last-minute in December, and Roth conversions.

If you have “income flexibility” in any way, your list should include:

“Do-it-Now” Moves

* Make a maximum contribution to your 401(k), which is $16,500, or $22,000 if you’re 50 or older this year.

* Sell taxable bonds now and pay the capital gains tax at 15% rather than a much higher rate in 2011.

* Make gifts of the annual exclusion amount.

“Do It Soon” Moves

* Prepare to give away large sums of money late in December. This year the gift tax is only 35% and there is no “Generation-Skipping” inheritance tax. However, you don’t want to make taxable gifts now just in case Congress reinstates the GST tax retroactively.

* Identify possible charitable contributions for deductions purposes. If taxes go up next year, you’ll want to defer these deductions.

* Accelerate your income if possible. If it looks like taxes rates will rise, you’ll want to take in as much as possible in 2010 rather than 2011.

The Roth Do-Undo

This year, taxpayers can convert regular IRAs into Roth IRAs. There are many considerations in this decision, so do give us a call about it, if you’re considering it ((909) 843-6427).

Good news: If you convert now, you have until October of 2011 to undo the conversion or decide whether to pay taxes in 2010 or 2011 and 2012.

After all, with Congress putting so many key tax decisions off, this kind 20-20 hindsight could come in handy.