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‘Tis the season . . . for tax planning

by Denise Howell//

The fall brings in cooler weather, autumn colors, festivals, family gatherings, and year-end tax planning. Yes, that dreaded word — tax. The year-end sneaks upon us quickly because of all the activities this time of year. But, there are numerous topics that need to be addressed before December 31. The main issue to discuss this fall is tax planning for individuals and businesses.

Individuals should discuss funding opportunities for retirement, education, and gifting. If you are not currently an active participant in a retirement plan, before year-end you should decide if 2017 will be the year you start participating in your employer-sponsored retirement plan. Not only will any deferred contributions reduce your taxable income, but also it’s never too early to start saving for your retirement. The best advice is to talk to a financial planner and ask questions regarding all options such as individual retirement accounts (IRAs), both traditional and ROTH; employer sponsored retirement plans; and annuities. If you are self-employed, Simplified Employer Plans (SEPs) and SIMPLE plans are the most popular along with solo 401(k) plans, which could give you varied options for investments to hold such as business ownership and real estate. Also, you may want to consider contributions to education IRAs for a family member. Gifting transfers could also reduce your taxable income in 2017 and subsequent years.

Charitable contributions are generally allowable up to 50 percent of your taxable income. If you are in higher tax brackets, this could significantly reduce your tax liability. Charitable remainder trusts allow taxpayers to designate assets that will transfer to the charitable organization upon death while obtaining a charitable contribution in the year the trust is created. You would need to meet with a trust attorney to discuss options available. Additionally, traditional charitable contributions to an approved organization should be considered.

Individuals with multiple employers, and households with two incomes, should consult their tax professional to ensure that sufficient tax has been withheld during the year. Withholding tax is generally calculated based upon the fact that the income is the only one of the year — even when you withhold at the married rates. Many times, married individuals with moderate to high income will find when they file their returns that a significant amount of tax is due. This is caused when combined income results in higher tax brackets. This also occurs when an individual has concurrent multiple employers.

Business owners should review income from the business and consult their tax professional to see if there are any transactions that could be made prior to January 1 in order to reduce taxable income. Tax rate changes and the effect on a transaction may also make it more advantageous to complete the transaction before the end of the year, for both businesses and individuals.

These issues and many others are why this fall is a good time to sit down with your tax and financial planner to re-evaluate your objectives for the short and long term.


Denise is a CPA licensed in Louisiana and Mississippi and is a member of the AICPA (American Institute of Certified Public Accountants which operates as the national regulatory agency for CPAs), the LCPA (Louisiana Association of Certified Public Accountancy) and the MSCPA (Mississippi Society of Certified Public Accountants).

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