Act fast if you want to cut your 2010 taxes

1. Tax rates are likely to go higher in 2011, so you might benefit from shifting income into 2010 and delaying deductions until 2011. It’s always a matter of personal circumstances, so analyze the two-year results of shifting income and deductions before you do anything.

2. Remember that required minimum distributions from retirement plans are back this year. If you’re over 70½, your 2010 distribution must be taken by December 31 or a 50% penalty may apply. If you turn 70½ this year, you could wait until April 1, 2011, to take your first distribution. In deciding, consider the likelihood of higher tax rates next year and the fact that a delay means you'll have two taxable distributions for 2011.

3. With the $100,000 income limit dropped for converting a traditional IRA to a Roth, consider doing a conversion before year-end. You can elect to pay the tax over two years’ tax returns, 2011 and 2012, or pay in full on your 2010 return.

4. Consider buying needed equipment for your business to benefit from the first-year $500,000 expensing option and 50% bonus depreciation.

5. If you’re planning to add employees soon, do so before January 1, 2011. If you hire someone who has been unemployed for a while, you might qualify for an exemption from social security payroll taxes on the new hire’s wages. Keep the new worker for at least a year and you could also qualify for a tax credit of up to $1,000.

6. Start a pension plan for your small business. You may be entitled to a credit of up to $500 in each of the plan’s first three years.

7. Review your portfolio and start thinking about offsetting gains and losses for the year. You can deduct $3,000 of losses against ordinary income.

Should I invest in my Traditional IRA, this year of so much uncertainty ?

My answer is YES,YES, YES, the best provision of a Traditional IRA which is the tax-deductibility of contributions is a good reason to consider making your investment this year. Today’s shaky state of our economy and the instability of the financial markets is a consideration, your retirement plan should be based on long-term investing goals and must continue.
While in the Traditional IRA, transactions in the account, including interest, dividends, and capital gains, are not subject to tax, withdrawals from the account, are subject to federal income tax and 10% early retirement penalty, some exceptions apply.

Please remember that you have until April 15,2010 to make your IRA Contributions for the tax year ended December 31, 2009.
Perhaps in times of economic uncertainty, the Traditional IRA funds might be placed in a more conservative investment vehicle not so reliant on the volatility of the stock markets. Be sure to consult a trusted financial advisor for information based on your individual needs.

José F. Padró, CPA.
padrocpa@padrocpa.com
www.padrocpa.com
PADRO and Company, P.A.


The information at this Site has been provided by José F. Padró , CPA. for general information purposes. It does not constitute legal, accounting, tax or other professional advice or services and is presented without any representation or warranty as to the accuracy or completeness of the information.

2009 Tax Planning Letter - PADRÓ & Company, P.A.

Dear Clients and Friends,

With an economy struggling to recover from the financial woes of 2008, we are all hoping that 2009 will be a better year. A new administration in Washington means we're certain to have more changes to the tax code in 2009, but the shape and timing of these changes will depend on our economic situation.

The financial turmoil may have you wondering whether you'll have enough money to send your children to college, to pay for your own retirement, or to meet your other financial goals. This Tax Planning Letter is intended to stimulate your thinking about tax strategies that can leave more money in your pocket to spend or invest.

Effective tax planning is a year-round, lifelong activity, and though constantly changing tax law can make planning a challenge, making it a priority will pay off with lower taxes. We are committed to working with you to find the tax strategies best suited to your individual circumstances. If you have questions about anything in this Letter or about your tax-cutting options, please call. And if you have friends or associates who might be interested in tax planning information, feel free to share this Letter with them.

Jose F. Padró, CPA

To view this letter go to:
http://www.planningtips.com/4422/default.asp?Co_ID=115183&Tip_ID=4422