Whether you are filing early or filing late, whether you work for someone or are self-employed, whether you are single, married or getting a divorce, whether you are young, in the military, retired, or going to school, whether you are buying or selling property, whether you have losses or gains, whether you are a U.S. citizen or a resident alien or just can’t pay your taxes, there is always a need for income tax planning.  Call me to set up a consultation and I’ll help you reduce your taxes.

Filing early? If you overpaid and are seeking a refund, adjust your withholdings. If you are paying tax, you may wish to increase your withholdings to avoid underpayment penalties. Irrespective, send your return by certified mail to avoid any claims by the IRS that they never received your return and/or payment.

Filing or paying late? Unless you were affected by the Sept. 11 terrorist attacks, late payments are subject to interest and penalty charges. The cost goes up sharply if you owe money and fail to file your return by your extended due date.

Do you work for someone? Have you contributed the maximum to your company’s tax-deferred savings plans? Have you contributed to their flexible spending accounts? Have you taken advantage of their transportation tax breaks? Have you named beneficiaries for your retirement plan?

Are you self-employed? Have you established and contributed to a Keogh plan? Tax-deductible contributions to self-employed retirement plans can be made anytime up until the due date of your return, including filing extensions.  Have you purchased any business property? Have you kept track of all your deductible expenses? Have you paid and deducted your medical insurance premiums?

Are you single? Do you itemize? Have you overlooked some deductions? Do you give to charity? Do you have any dependents?

Are you married? If newlywed, think about notifying the Social Security Administration (Form SS-5 is available at http://www.ssa.gov) of any name change, the IRS (Form 8822 is available at http://www.irs.gov), your employer and the U.S. Postal Service of any address change. Later, as the filing season approaches, consider itemizing your deductions, selecting the right tax return form to use, and choosing your filing status (married filing jointly or married filing separately). Each year you should calculate your taxes jointly and separately to see which filing status results in the lowest tax.

Are you getting divorced? You will have lots of tax issues to think about, for example, a new filing status, the dependency exemption, innocent spouse relief, alimony, child support, health insurance, property transfers, deductibility of attorney fees, etc.

Are you young? If you are under age 14, you are subject to the “Kiddie” tax. Once you reach the age of 14, your separate tax status may permit a significant amount of investment income to be taxed at rates that may be significantly below the rates that apply to your parents.

Are you in the military? There are special tax rules if you are serving in a combat zone such as Afghanistan (e.g., what is subject to income tax, filing extensions, what is or is not taxed at your death, etc.). For additional details, click on my Taxation of the Military outline.

Are you retired? Thinking of moving to Florida or another state that does not have an income tax (i.e., Alaska, Nevada, South Dakota, Texas, Washington, and Wyoming)? Bear in mind, that low income tax rates may be counterbalanced by high estate taxes or personal property taxes. Careful timing of investment sales and retirement account withdrawals can sometimes prevent some Social Security benefits from being taxed away. Some retirees can limit the damage by spreading out the receipt of investment income over more than one year. For some other retirees, bunching the receipt of investment income in alternate years will reduce exposure to the benefits tax every other year.

Are you in school? There are a variety of tax incentives that you may wish to consider to help reduce the ever-increasing cost of higher education, including Education IRAs and Qualified State Tuition Programs (a/k/a “529 Plans”) as savings vehicles, Hope and Lifetime Learning credits for expenditures for current students and a limited deduction of college loan interest after graduation.

Are you looking to buy but can’t decide if you should invest in tax-exempt bonds or taxable investments? Compare your after-tax return on the taxable investment with the return on the tax-exempt investment. To figure out your after-tax return, you need to know your combined income tax bracket (federal and state), since that determines how much of your investment income you can keep. If you pay 25% in federal taxes and 5% in state taxes, your combined bracket is 28.75% (state income taxes are deductible for federal purposes) or say 30%, which means you keep approximately 70% of the income the investment generates. So if a taxable investment guarantees a 7% return, you'll only pocket 70% of that, or about 4.9%. If a tax-exempt instrument offers less than that, you'll do better with the taxable investment.

Are you selling your home? Generally, you may exclude from income up to $250,000 ($500,000 if filing a joint income tax return) of gain realized on the sale or exchange of a principal residence provided that you owned and occupied the property as your principal residence for an aggregate of at least two of the five years before the sale and you have not elected to apply the exclusion to another sale or exchange within the last two years. Don’t forget to consider state income tax consequences.

Do you have losses in your portfolio? Watch out for the wash sale rule (i.e., selling a security at a loss and purchasing the same security within thirty days). Your capital losses can offset your capital gains plus an additional $3,000 of ordinary income. For example, if you have $10,000 in capital losses and no capital gains this year, then you can claim only $3,000 in losses. But if you have $5,000 in capital gains and $10,000 in capital losses, then you reduce your total income by $8,000 ($5,000 + $3,000). Any unused losses may be carried over to future tax years.

Do you have gains? Are they capital or ordinary? Short term or long term? Do you have losses against which to offset these gains? Should you make the "deemed sale" election on qualified long-term capital gain property? Are you keeping track of your tax basis information on all of your assets? (Your tax basis is used to calculate the taxable profit when you sell an asset). This will become even more important when and if they repeal the estate tax.

Are you a citizen thinking of renouncing your U.S. citizenship? Are you are a resident alien who has held a green card for as little as six years and two days? If yes, you may be subject to the onerous 10 year U.S. departure tax.  You will need to obtain a ruling from the IRS to avoid paying tax at the graduated rates applicable to U.S. citizens on an expanded category of U.S. source income. Additionally, if you become subject to these rules you will also have to plan around special estate and gift tax expatriation provisions.

Can’t pay your income taxes? Fill out Form 9465, "Installment Agreement Request," and attach it to your completed return. The IRS will let you know within 30 days or so whether your request for a monthly payment plan is approved. If paying your tax bill, even over time, seems an unaffordable proposition, you can try to negotiate a deal with the IRS. Under the IRS "Offer in Compromise" program, individuals in serious financial straits can try to work out a settlement and pay less than they owe. The IRS considers compromise offers in cases where paying the full amount would create a severe economic hardship for the taxpayer. An example would be someone facing large bills for a long-term illness or disability. A retiree might be able to qualify for some relief if paying the IRS in full would leave him/her short of funds to pay basic living expenses. Offers are made by filing IRS Form 656, "Offer in Compromise."