The following are generally applicable year-end tax-saving tips for individuals. However, individual circumstances can have a significant impact on the appropriateness of tax strategies for a particular person. Contact us for a tax-planning meeting where we can discuss which approach would be best for you.
This is a great time of year to take a preliminary look at your likely tax picture for 2001. Estimate your income and deductions, and make sure your withholding and estimated tax payments will be sufficient.
If you're losing out on deductions or tax credits because your AGI is too high, consider steps to reduce AGI or shift income into next year. You can reduce AGI by taking losses on poorly performing investments or contributing more to retirement accounts. Or, if you're self-employed, you can delay billings until after year-end.
Contact our office for a review of the best tax-cutting moves available in your specific situation.
New baby in 2000? Get the social security number you'll need when you file your return.
Don't forget the "nanny tax." If you employ household workers such as nannies, gardeners, or housekeepers, and pay $1,100 or more to one person in total 2000 wages or $1,000 total for all household employees in any one quarter, you'll be liable for payroll taxes for the total year when you file your own income tax return next April. Also, starting in 1998, employer taxes you owe must be factored into your withholding or quarterly estimated tax payments.
As parent or guardian, you may have tax returns to file for your children or other dependents. A 2000 return is due for a dependent if:
a. "Earned income" only (for example wages) amounting to more than $4,400 (single). OR
b. "Unearned income" (for example interest) of $1 or more and total income is more than $700.Different cutoff amounts apply if dependents are married, over 65, or blind.
You may elect to include your child's unearned income on your tax return in certain circumstances.
Get the necessary numbers. If you owe payroll taxes for household workers, you will need an employer identification number (EIN) for the W-2s you must give employees by January 31, 2001. If you don't already have that number, file form SS-4 with the IRS.
It is important that you file and pay taxes on time. The IRS has begun taking a very hard line this year and imposing many penalties for late payments and late filing in situations where these had previously been ignored.
File information returns. Form 1099 information returns are required for various payments made during 2000. Among the more common are (1) dividends, interest, or royalties of $10 or more, and (2) rents or business payments of $600 or more.
© Copyright 2000 Raymond S. Kulzick. All rights reserved. 001124.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.