2012 Tax Tips

* Best Tax Tips *

• Our deficit is now up to 14 trillion dollars and our country is spending double what it brings in from income tax revenue- taxes have nowhere to go but up.

• Shelter what you can now by using vehicles such as:

  • Roth IRAs
  • Employer plans
  • Fixed annuities as a substitute for CD’s if you are 59 ½ or older
  • 529 plans for education savings
• Take advantage of low capital gains tax rates- sell highly appreciated property now if it makes sense to do so.
• Make sure you have the right beneficiaries on your retirement plans so your heirs can take income over time and avoid a big tax bill.
• Lump discretionary medical expenses into one year, especially if your income is down, so you can exceed the threshold for deductions.
• Convert traditional IRAs to Roth IRAs in years that your income is down or your account value is low to minimize the tax.

* Best Financial Tips *

• Refinance now!!! Will we ever see opportunity like this again? If you do refi, you might also have a big write off of points from previous refinancing. Make sure you mention this to your preparer.
• Trim costs. Write down a monthly budget and look at where your money goes. Spend wisely!
• Social security, as we know it, is going away. Most likely, it will be means tested, phasing out based on income and assets. Pensions are dinosaurs too, so start saving now. A little over time is easier than a lot at the end.
• One great way to temper volatility in your portfolio is to add dividend-producing funds to your portfolio. Reinvesting the dividends monthly helps you buy more shares when prices are low. This is called dollar
  cost averaging. This strategy works best in tax-deferred accounts because taxes on divs are postponed until withdrawals are taken.
• Create a foolproof strategy for retirement income that will last as long as you live. Start choosing your investments based on what you will need and then solve for that. – Invest with a purpose!

* Best Business Owner Tips *

• Cash flow, cash flow, cash flow.  Keep a reserve to sustain you in down cycles.
• Use a corporate entity to protect your personal assets.
• Look at your numbers monthly- even when you are too busy.

These 2012 Tax Tips were provided to you by Julia Brufke Wenger, Owner of Phoenix Tax Consultants, LLC.