Early Tax Year Planning Tips
Profit Ability Article Highlight

As always, we advise acting on the items below sooner in the year rather than later. Be sure to contact a tax professional at Talley & Company with questions on any of these items.

Increase your Pretax Retirement Plan Contributions: Take advantage of increased limits for 401k plans and "catch-up" contributions available for citizens 50 years or older. With the regular and catch-up limits increasing in 2006, total allowable tax-favored IRA contributions are up 10%.

Plan, Plan, Plan: Meet with a tax planning professional as soon as possible to ensure your 2006 tax liability is as low as possible.

Strategize to Avoid the AMT: The best defense against the AMT is proactive planning that takes into account all of the major moves you will make throughout the year.

Carryover Losses: Be sure to carry over available losses from 2006, including capital losses, charitable deductions, net operating losses, investment interest expense and eligible tax credits. This is one area in which we highly recommend some professional tax planning.

Make Your 2006 Roth Contribution Early in the Year: Get the tax-free growth on that contribution going early in 2006. The extra returns on that early annual contribution versus a late-year contribution will add up over the decades from now until your retirement.

FSAs: Do some careful cost projection and planning to maximize your FSA (Flexible Spending Account) this year. Be sure to account for co-payments, deductibles, vision care costs, dental care costs, prescriptions, allowable over-the-counter drugs and other costs.

Review Your Withholding: Where possible, pay your children employed in the family business a fair wage in order to realize that income at a lower tax rate.

If you have further questions on this issue, please contact our offices.