United States: Prepare For Year-End Tax Planning

Last Updated: October 12 2016
Article by Roy H. Kramer, CPA/PFS, CDFA, CDS, NSSA

It's not too early to get ready for year-end tax planning. In fact, many strategies take time to set up in order to gain maximum benefit. Here are some preliminary considerations that may help you prepare.

Gather your data. One major reason for planning towards year's end is that you usually have a clearer picture of what your total income and deductions will look like for the entire year. From those estimates, you may want to do some planning to accelerate or defer income and/or deductions in a way that can lower your overall tax bill for this year and next. In order to do that effectively, you need to take inventory of your year-to-date income and deductions, as well as take a look ahead at likely events through December 31, 2016, that may impact that tally. Since you'll need to eventually gather this data for next year's tax return, you can double-down on the benefits of doing so now.

Personal changes. Changes in your personal and financial circumstances – marriage, divorce, a newborn, a change in employment, investment successes and downturns – should all be noted for possible consideration as part of overall year-end tax planning. A newborn, for example, may not only entitle the proud parents to a dependency exemption, but also a child tax credit and possible child care credit as well. Also, as with any 'life-cycle" change, your tax return for this year may look entirely different from what it looked like for 2015. Accounting for that difference now, before year-end 2016 closes, should be an integral part of your year-end planning.

New developments. Recent tax law changes – whether made by legislation, the Treasury Department and IRS, or the courts – should be integrated into a specific-to-2016 year-end plan. A strategy-focused review of 2016 events includes, among other developments:

  • The PATH Act (including those handful of extended provisions that will expire before 2017, as well as longer-extended changes to bonus depreciation and expensing rules)
  • New de minimis and remodel-refresh safe harbors within the ground-breaking and far-reaching "repair regulations"
  • The definition of marriage as applied by new IRS guidance
  • Growing interest by the IRS in the liabilities and responsibilities of participants within the "sharing economy"
  • Changing responsibilities of individuals and employers under revised rules within the Affordable Care Act
  • The impact of recent Treasury Department regulations, including those affecting certified professional employer organizations, late rollover relief, changes to deferred compensation plans, and partial annuity payment options from qualified plans

Timing. Once December 31, 2016 has come and gone, there is very little that you can do to lower your tax bill for 2016. True, there are some retirement plan contributions made early in 2017 that may count to offset 2016 liabilities and some accounting-oriented elections may be made when filing a 2016 return. However, those opportunities are limited, with much greater potential savings on most fronts available if action is taken by December 31. For business taxpayers, one of many planning points to keep in mind: a deduction for equipment is not allowed until it is "placed into service" within the business operations; purchasing it is not enough.

If you have any questions about tax planning, please contact your tax advisor or Roy Kramer, Partner, Tax Services, at 314.983.1265 or rkramer@bswllc.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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