Tax attorneys typically come in two flavors. There are those who help you to avoid tax problems through tax planning. These tax attorneys will advise you on the tax consequences of transactions and will help you to avoid paying more taxes than necessary. And there are those who try to clean up the mess that has happened through poor tax planning. These “tax relief” attorneys will help you with tax controversies and help you in situations where you owe taxes and cannot pay. Our firm focuses on the latter, but today I want to pass along a few tax planning tips from Fox News writer, Kay Bell. These are her year-end tax strategies, and they are specifically geared for what may lie ahead for us in 2013 (i.e., the “fiscal cliff”):
- Accelerate your income into 2012, if possible, to avoid having to pay higher taxes at a higher rate next year. However, be careful you are not illegally manipulating when you receive the income; the IRS looks at when you had a right to the income.
- Take capital gains in 2012 to avoid potentially higher rates.
- Sell major assets that have lost value (unless capital gains tax go up in 2013).
- Get medical and dental work done now that you can still easily claim itemized medical deductions.
- But some may want to defer itemized deductions until next year in order to offset potentially higher tax rates.
- Convert your traditional IRS to a Roth IRA
As always, these are very generic tax tips and you should consult a CPA, tax attorney, or other tax professional who is familiar with your individual circumstances before making these types of decisions.