How to Avoid Tricky Tax Traps:
From January 2005
Community Comments
Spark a community dialogue. Be the first to contribute by adding your comments.
“I don’t know an easy way to say it, or an easy number,” replies Colson. “Alternative Minimum Tax is a whole form. It depends on how many itemized deductions you have — the amount of your ‘tax preference items,’ they call it.”
Knowing whether you’ll be caught by the AMT can influence tax planning. Normally, it’s smart to pay property taxes and similar items in advance to maximize the write-off. But the AMT might wipe out that advantage, say McCarl and others.
It’s Good to Be Rich
With taxes, as with so many aspects of life, wealth can provide flexibility.
“Income limits phase (wealthy clients) out of lot of deductions,” says McCarl. However, these clients are usually also in a position to ask for some favors. “Joe Paycheck may not be able to defer that December 31 paycheck, but a rich person may be able to go to the board and say ‘Can we delay this bonus check?’” McCarl says.
Or, if the bonus is a done deal not likely to be repeated next year, it may be smart to put off paying medical expenses to the following year to more easily reach the threshold for deductions.
Just get an early enough start to finish all the plays before the end of 2005. “For our year-end tax planning, we start in June or July,” says Warren Kashiwagi, a partner with Perry-Smith LLP in Sacramento. “It gives you enough time to implement things.”
Midsummer is usually a slack time for accountants, he says, a period that provides breathing space to confer with wealthy clients and debate whether they should sell some assets to take advantage of existing capital gains rates.
Continued...
Knowing whether you’ll be caught by the AMT can influence tax planning. Normally, it’s smart to pay property taxes and similar items in advance to maximize the write-off. But the AMT might wipe out that advantage, say McCarl and others.
It’s Good to Be Rich
With taxes, as with so many aspects of life, wealth can provide flexibility.
“Income limits phase (wealthy clients) out of lot of deductions,” says McCarl. However, these clients are usually also in a position to ask for some favors. “Joe Paycheck may not be able to defer that December 31 paycheck, but a rich person may be able to go to the board and say ‘Can we delay this bonus check?’” McCarl says.
Or, if the bonus is a done deal not likely to be repeated next year, it may be smart to put off paying medical expenses to the following year to more easily reach the threshold for deductions.
Just get an early enough start to finish all the plays before the end of 2005. “For our year-end tax planning, we start in June or July,” says Warren Kashiwagi, a partner with Perry-Smith LLP in Sacramento. “It gives you enough time to implement things.”
Midsummer is usually a slack time for accountants, he says, a period that provides breathing space to confer with wealthy clients and debate whether they should sell some assets to take advantage of existing capital gains rates.
Continued...
The Magazine
Site Links
Prosper Plus +
- Get Prosper Plus to receive e-mail alerts, special event invites, and content that interests you.
Community
- Join the Community and start participating. It's fast. It's easy. It's free.
Advertise on this site! Show your support for the Prosper Network and reach influential thought leaders and web users like yourself. Contact us to find out how.
© 2004-2007 Prosper Media, LLC. All Rights Reserved. Terms of Use | Privacy Policy
The materials on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Prosper Media, LLC.
Community Comments