2009 Tax Year-End Checklist
It's that time again – the holidays are in full swing and the big tax deadlines are around the corner. So, what can you do to minimize that big tax bill next spring? Here are a few strategies that may be applicable in your personal and/or enterprise interests.
Individuals - Strategies to Minimize/Eliminate Estimated Tax Penalties
- Adjust federal withholding from wages before year end: The IRS treats federal withholding as paid evenly throughout the year, so those expecting year-end bonuses can likely carry the burden of a large change in withholding during the same pay period. This is most beneficial for those that are subject to quarterly estimated payments and are basing their calculations on current 2009 income rather than the 2008 safe harbor provision. Contact your accounting department to revise your withholding.
- Use withholding from an IRA Distribution: For those clients subject to required minimum distributions, consider a projection of year end taxable income in order to determine exactly how much to withhold on your end of year distribution. You could target an amount to lessen or avoid estimated tax penalties or alternatively, make sure you don't withhold too much unnecessarily.
Individuals - Self-employed Individuals: establish a Keogh plan
- Establish a Keogh plan before the end of 2009. You have as late as the extended due date of your tax return to contribute to this Keogh plan and deduct them on your 2009 tax return.
- However, a self-employed person who misses the year-end deadline to establish a Keogh plan has until his extended 2009 return due date both to establish and to make deductible contributions to a Simplified Employee Pension (SEP) for 2009.
Individuals - Gifting up to $26K before year end
- Married couples (who split gifts or give gifts of community property) can gift up to 26K (13K for single individuals) to each donee without being taxed on the transfer. The gift must be transferred by 12/31/09 to take complete advantage of the annual exclusion. For larger gifts, consider waiting to transfer amounts over 26K until January 1st in order to utilize the 2009 and 2010 annual exclusions.
Individuals - Year End Bonus Deferral
- Consider requesting your employer to pay out any potential bonus at year end in the first week of January in order to defer the tax burden to 2010.
Businesses - 2009 Deduction for Bonuses Paid in 2010
- If you are an accrual basis corporation, you can take a deduction in 2009 for bonuses paid in 2010 if:
- The employee doesn't own more than 50% in value of the corporation's stock,
- The bonus is properly accrued on the corporations books before the tax year end, and
- The bonus is actually paid within the first 2 ½ months (March 15, 2010 for calendar year taxpayers) of the following tax year.
Individuals - Itemized Deduction for Sales Tax Paid
- If you are considering buying a new or used vehicle before year end, you may want to accelerate your purchase to 2009 so that you can take an extra itemized deduction for the sales tax paid. Also available for 2009, the sales tax paid on a vehicle may qualify to be deducted even if you don't itemize. It can be taken in addition to the standard deduction. Please note that certain parameters must be met.
Businesses - Research Expenditures
- At the taxpayer's election, research expenditures may be currently deducted instead of capitalized. A credit may also be available.
- If you feel you may have some research activities that may be eligible, please contact your tax advisor to discuss in more detail.
Individuals - $8,000 First Time Homebuyer Credit
- The $8,000 credit previously set to expire on November 30, 2009 has been extended for homes contracted for sale by April 30, 2010, and closed by June 30, 2010.
- Also, the extension of this provision includes a $6,500 credit for qualifying existing home owners who have owned their current home for five years or more on the purchase of a new home.
- The adjusted gross income (AGI) threshold for a married couple increased from $150k to $225k (single taxpayers from $75k to $125k).
Individuals - Taxpayers 70.5 years of age or older with Required Minimum Distribution ("RMD") requirements:
- Qualified Charitable Deduction from an IRA set to expire on December 31, 2009.
- See "Take advantage of Required Minimum Distribution provisions before they expire" article below to read more about deductions that may apply to you.
Businesses - 50% Bonus Depreciation and $250,000 Expensing Limitation
- There is a 50% bonus first year depreciation deduction for most new machinery, equipment, and software. Also, the current expensing limitation of business property purchased is $250,000.
- See "2009 End of Year Planning for Business Purchases" article below to read more about deductions that may apply to your business.
Our dedicated team of tax professionals stand ready to assist, should you have any questions. If you would like to be connected to one of our tax professionals to discuss this and other tax laws, please contact Holly Fish, Director of Client Services.
