By Brian Zen, CFA
At, our mission is help people build wealth with peace of mind. We understand that there can be no peace of mind unless we clear up the tax headaches timely and effectively. Here we compiled a comprehensive list of useful tips for reducing Uncle Sam’s bite into your earnings.

ZENWAY.COM INC. wealth management tax planning estate strategies

211 north end ave. new York, ny 10282 t. 646.388.0887

copy of their birth certificate and passport. Keep all business-related receipts. IRA and business or rental property — should be kept longer. but you're already in a high tax bracket. Good recordkeeping will help you remember the various transactions you made during the year. Reducing your adjusted gross income will help. tax records should be kept for three years. Get into the habit of keeping good records all year round. but reducing your itemized deductions is beneficial all around. It's time to enter them into your books so that you can use them to calculate deductions. say seniors paying substantial wages or fees for in-home care. Corral cash receipts. and your overall taxable income to see if you can withdraw money from those accounts tax-free or at very low tax rates (10% . www. Suppose you have stocks showing substantial gains that you'd like to sell. If you're likely to be subjected to the alternative minimum tax.2 ANY QUESTIONS? PLEASE CALL US AT: 646.say over $ it's time to start looking at your expenses to see if they really should be itemized or if it's possible to split some of the expenses between Schedule E. Pay your January 1st mortgage payment on or before December 31st. John D. Look through your car. and save them in a safe place. But only do it if the splits are truly justified. . See if anyone close to you (very close family member or friend) is sitting on a high capital loss carryover. etc. The file should include a recent photograph. which in turn may make filing your return a less taxing experience. Build a file for each family member. Deal with big stock winners. Get your appointment calendar out and see if you have any lunches. Remember to take into account parking meters. preparing taxes is a dreadful chore. Update your family tax records. Schedule C and Schedule A. That overfunded IRA or pension plan is well worth looking at before the year is over if you're at or approaching retirement age. etc. pockets. or Individual Taxpayer Identification Numbers confirmation. Keep track of what the receipts are for. So people running up expenses far in excess of taxable income. at your visor.15%). Start gathering and organizing the receipts you paid by cash.0887 Benjamin Franklin once said: “In this world nothing can be said to be certain. except death and taxes. Review your current medical expenses and other itemized Tax Services Division. Review your alternative minimum tax situation. They will get the stock with your low basis. To help our clients tackle their tax issues intelligently. hairdressers. our mission is help people build wealth with peace of mind. Bookkeeping is the only class he took as a teenager and he started to run his life as a bookkeeper recording his expenses religiously throughout his life. At Zenway. You can avoid headaches at tax time by forming the habit to keep track of your receipts and other records throughout the year. We understand that there can be no peace of mind unless we clear up the tax headaches timely and effectively. But they won't pay any tax because their capital loss carryover will eat up the profits. for which you paid cash that you've never recorded.” To most Americans. And if you do need them in a hurry. That’s why we started our Zenway. for the various receipts you've been stashing.000. Rockefeller never completed any formal education. When you're over 59 1/2 there are no early-withdrawal penalties. tips to doormen. porters. You’ll need this documentation should the IRS select your return for examination. stock transactions. but some documents — such as records relating to a home purchase or sale. etc. That’s how important bookkeeping can be. The habit of bookkeeping became the fundamental driving force to make Rockefeller one the greatest businessmen ever lived. a copy of each person's Social Security card. Consider gifting them your highly appreciated stock. Normally. pay phones.zenway. dinners. may be able to pull money from those retirement accounts without paying taxes on it. Especially one they have no hope of using up in their lifetimes. Records help you document the deductions you’ve claimed on your return.388. Habit is the most powerful force in human lives. This is the time to start reducing those balances if they are very high -. having them in one place will save time and money. we compiled the following list tax saving tips and best practices. Check your retirement balances. You never know when you will need those things.

Or a doctors or hospital bill. Increase expenses if necessary. This deduction is also applicable for principals and others who are employed in a school. This could apply to an estimated state income tax bill due January 15. tax-friendly investment. (But speeding up deductions could be a blunder if you're subject to the Alternative Minimum Tax. among other such investments. rent if you think you will be in the same or lower tax bracket next year. there is up to a $1.000 from previous years’ losses. If you’ve done well with your investments and are looking at significant capital gains. take a deduction from your students. consider tax-free government or municipal bonds. Teachers. or a property tax bill due early in the next year. you can alter your billing slightly to defer income if you see yourself heading into a higher tax bracket. If you don't think your personal income tax bracket will be higher next year. make sure you'll be itemizing for next year rather than claiming the standard deduction. prior to year-end is the time to offset some of those gains by selling a losing venture. where you can choose either to deduct state income or sales taxes. and you're not affected by the alternative minimum tax. 3 TAX TIPS This allows you to take an additional deduction for interest paid. such as those available when you adopt a child or when you elect to claim a Lifetime Learning Credit. Consider tax-free investments. revenue. itemizing would be a mistake. the IRS will reject the write-off if the lack of proper record keeping is discovered in an audit. Delay bonus. Get receipts for your charitable contributions. if you see that your income is high. Returns are not very high. you can make state and/or local tax payments before the end of this year so you can take a deduction this year. Take all applicable tax credits.000 tax credit. Just as you can elect to defer income.COM INC. For each child under the age of 17. . If you’re not sure if this deduction applies to you. as discussed below. Prepay your state and/or local taxes.). Tax credits are more valuable than tax deductions. Accelerate income if your tax bracket will be higher next year. for example. you only had to have a receipt to back up contributions of $250 or more. Accelerating payment of deductible expenses due in January can pull the write-offs into 2007. There are also various other credits. Unless the total of your qualifying expenses exceeds $5. etc.ZENWAY. While donations should not be made simply for tax www. Before you go into high gear racking up deductions. Being self-employed. Save all your purchase receipts to document the state sales taxes which you may be able to deduct from your federal tax return. If you don't have such a written record. you can make many more year-end business purchases to add some tax deductions before December 31st. regardless of the amount. Remember to add the interest amount to the amount reported by your lender when they send you a 1098 form. (Before 2007. remember that you can carry forward up to $3. but if you're looking for a safe. Note this change in the rules for charitable contributions that first applies in 2007: You must have either a receipt or a canceled check to back up any contribution. Remember to deduct state income taxes or state sales taxes.700 if you're married and will file a joint return.) Defer income only when necessary.zenway. This type of investment is particularly good for a high-income individual. Claim home energy tax credit if you installed energy efficient air conditioners. Year-end income-expense management may help. contact the IRS. You can still take up to a $250 deduction on materials purchased to make the learning experience better for your students. windows.350 if single or $10. Take a loss.

you suffered the loss when the securities fell in value. The charity you're interested in helping can help you with the details.because you get credit for the full standard deduction regardless of how much you actually spend. Interest on up to $100. if you sold the securities today. up to a $3. If you are on the itemize-or-not borderline. net losses from either category can be deducted in full against other income such as your salary. are not deductible when figuring the AMT. lots of taxpayers fell into the claws of the AMT because of the AMT's special treatment of incentive stock options. Sell loser stocks. The goal is to surpass the standard-deduction amount and claim a larger write-off.5% of your adjusted gross income can be deducted under the regular rules. And that can be a particular problem for people who are not used to figuring out sticky tax issues. Sometimes accelerating deductions can cost you money… if you're already in the alternative minimum tax (AMT) or you inadvertently trigger it.zenway. In the lean years. It's not a cockamamie idea to realize losses to save on taxes. But under the AMT. you skimp on deductible expenses to hold them below the standard deduction amount .4 ANY QUESTIONS? PLEASE CALL US AT: 646. A strategy for net gain. using the tactics outlined above. Begin with an outline of exactly where you stand. State and local income taxes and property taxes. you need to segregate your long-term (for securities owned more than one year) and short-term sales (for securities owned one year or less) so far this year and your open positions that would produce each kind of gain or loss. Consider “bunching”. although long-term gains get gentle tax treatment.388. If your trades so far in 2007 have resulted in a net gain. In recent years. As long as you've owned the asset for more than one year. which will be taxed at your top tax bracket? Taking any kind of loss — short or long term — can offset that gain dollar for . you cram in as many deductible expenses as possible. Selling just makes it official… and makes the IRS pick up part of the loss. year-end plans stress pushing as many deductible expenses as possible into the following fat year when they'll have some value. In alternating years. Tango with AMT (Alternative Minimum Tax). using the loss to sop up the gain on other deals and pull down your tax bill. After all. the AMT is now increasingly affecting the middle class. Remember to get receipts. or close to it. What if you have a net short-term gain.000 annual www. The AMT is figured separately from your regular tax liability — with different rules — and you have to pay whichever tax bill is higher. no matter how you use the money — so you want to be sure you're up to date paying that interest. take a hard look at the securities in your portfolio that show paper losses. the threshold is 10% for the AMT. This is the practice of timing expenses to produce lean and fat years. This is a year-end issue because certain expenses that are deductible under the regular rules — and therefore it might make sense to accelerate payments — are not deductible in AMT-land. In other words. Also. you get to deduct the market value on the date of the gift and you avoid forever paying capital gains tax on the appreciation that built up while you owned the asset.0887 purposes but for philanthropic reasons. Your portfolio cries out for special attention as the year draws to an end. for example. while medical expenses that exceed 7. what would your profit or loss be? Because the tax law treats different kinds of gains differently. Sometimes.000 of home-equity loan debt is deductible under the regular rules. And. Originally designed to make sure wealthy people could not use legal deductions and congressionally created loopholes to drive their tax bill to zero. you can always make a couple more at the end of the year to lower your tax bite. Since it's up to you when to sell securities — and convert paper gains and losses to real ones — you can mix and match your trades to deliver the tax outcome you desire. Donate appreciated stock or property rather than cash. home-equity loan interest is only deductible if the money was used to buy or improve your primary or second home. though. Maybe now is the time to unload some of those stocks. Draw up a list of your trades so far and the gains or losses on each. your year-end strategy should focus on bunching. In one year. selling stock acquired via options before the end of the year can get you out of AMT-land. Make another list showing your current holdings and the paper gain or loss to date.

look what happens: Since they have the same par value and coupon rate. Watch out for mutual fund ex-dividends. As with much year-end tax planning. regardless of when settlement takes place. it usually makes sense to do so before the ex-dividend date. as high as 35%. When you sell. a gain or loss should be reported on the return for the year the trade occurs. They can grow to a substantial sum because they compound over time free of taxes.138 out of the investment — the difference between what you got for the old bonds and what you paid for the new ones. if your sales so far have produced a net loss. www.000. That means profits and losses taken as late as the closing bell on New Year's Eve go on the current year's return. You pull $1. a new record. perhaps the tax consequences can be decisive. dividends and profits are paid out.000 face value of AAA-rated bonds. Your bond rating increases from AA to AAA. the market price of your bonds has slipped to $84. 5 TAX TIPS maximum write-off. you'll have a $15. Company-sponsored 401(k) plans may be the best deal because employers often match contributions. the earlier you begin scouting for promising candidates for swapping. your annual income remains the same: $7. But if a particular investment is on the sell-or-hold borderline. Consider this example: Assume you own $100.250 tax loss.050. As noted. you get 15% long-term capital-gains treatment. you're better off buying after the distribution — you get your shares at the lower price and avoid the tax bill on what is essentially a rebate of part of your purchase price.000 write-off are carried over to cut your tax bill in the future. As far as the IRS is concerned. At the same time.COM INC.ZENWAY. Max out your IRA contributions. The supply dwindles and competition from other investors heats up as the year draws to an end. When interest. Your investment goals must be paramount. perhaps you should go in for some year-end profittaking. Of course you don't want to let the "tax tail wag the investment dog" by allowing the search for tax savings to lead you into bad investment decisions. only $3.750. Last-minute sales Since it takes several days to settle a trade — between the time you order the sale to the time you get your money — sales during the last few days of the year often straddle year-end. A strategy for net loss On the other hand.612. Before you invest. any accumulated dividends and capital gains are included in the share price and therefore are considered part of your profit. Don't think you're getting a windfall if you buy just before the payout. with a 7% coupon and a 2015 maturity. share values fall by the same amount. as you begin your year-end planning. Mutual funds often pay out most of their capital gains and dividends in December — and this year more than $400 billion will be paid out. so if you have a bigger loss. In November. assume you can buy $100. If you sell at that price. But the 15% gains are replaced dollar for dollar by the income distribution — part of which could be taxed in your top bracket.zenway. Bond Swap The point of this year-end maneuver is to lock in a tax loss by selling bonds that have fallen in value (usually because market interest rates have risen) and reinvesting the proceeds in other bonds. There may be no better investment than tax-deferred retirement accounts.000 worth of AA-rated bonds with a 6% coupon and a maturity date in 2016. Done right. call the fund to ask for the exdividend date — and buy after that day. you have an incentive to cash in some of your other profits. Because the loss will offset additional gains dollar for .000 of net losses a year can be used to offset income other than capital gains. It's a tax mistake. Any net losses beyond the $3. When the fund pays out the dividends.250 loss. If you plan to sell shares around year-end. But the payout is taxable. for $83. the better. If you've owned the shares more than 12 months. If you sell one set of bonds and buy the other. you save $3. If it offsets gains that otherwise would have been taxed at 20%. you can add to your income without adding to your tax bill. the share price drops… and so does your taxable profit when you sell. And you can claim a $15. you can maintain the income stream from your bonds.

and even less if you live in a state with a state income tax. an extra $1.000. costing you $750. The basic contribution for IRAs (either traditional or Roth or a combination of the two) for 2007 is $4. stashing an extra $1. run the 23-year-old to sell by year-end and the gain will be taxed at just 5%. but the sooner you get your money into the tax-shelter.0887 Bump up your 401(k) contribution so that you are putting in the maximum amount of money allowed ($15. How much you need to withdraw is based on your age.000 until the tax filing deadline (including extensions) for your 2007 return. If you're in the 25% federal tax bracket.000. you need to use it up. If you think you can't afford it.zenway. consider asking your IRA sponsor to withhold tax from the payment.000. saving the family $500. If you make a withdrawal at year end. the year of your 70th birthday if you were born before July 1. the sooner it earns tax-deferred (in a traditional IRA) or tax-free (in a Roth version) returns. Once the plan is in place. or else. Failing to take out enough triggers one of the most draconian of all IRS penalties: The government will relieve you of 50 percent of the amount that should have come out of the account but did not.000 in your 401(k) cuts take-home pay by just $750. The kiddie tax taxes a youngster's investment income over $1. But the fact that withdrawals in retirement will be tax free could make this the better home for your increased contributions. and you set the amount. which means you have put aside before-tax earnings to cover medical and dental expenses through a plan offered by your employer. The required minimum distributions apply to traditional IRAs. Say you own $10. because after-tax money goes into a Roth 401(k).000. But give that stock to an 18. to make IRA contributions for 2007. starting in 2008 it expands to cover children under 19 and full-time students under 24. A money-saving. the fact that pre-tax money goes into your account means your savings go up more than your take-home pay goes down.000 into the account really cost you $1. Make doctor appointments now and buy necessary medical supplies that are covered in the plan. If you have a traditional 401(k). Your broker can tell you how to make the gift. Use up your flexible spending accounts. If you sell. annual withdrawals must be made by December 31 to avoid the penalty. In the year you reach 70 1/2 — that is. Also consider contributing to an IRA for yourself and your spouse. if you haven't already maxed out. If you are lucky enough to reach age 70 1/2 (or if your parents have).com . If you qualify for the "catch up. if your employer's plan allows this provision. but those 50 and older by year end can contribute an extra $1. For 2007. you are eligible to make "catch up" contributions to your 401(k) plan. but opting for withholding could let you avoid the hassle of making quarterly estimated tax payments. year-end opportunity is best told with an example. If you are 50 or older by the end of the year. Every dime you contribute can be deducted on your return to cut your tax bill for 2007. Avoid Kiddie Tax while you can.6 ANY QUESTIONS? PLEASE CALL US AT: 646. or you forfeit the balance. for a total of $20. Withholding is voluntary. If you have a flexible spending plan.500. Self-employed people should set up Keogh plans by December 31. the tax disappears when a child turns 18.000 to your 401(k) plan in 2007. Remember to take your mandatory IRA distributions before year end. 2008. for example.000 for a total of $5. If you're lucky enough to get a year-end bonus. remember that the law demands that payouts must be made from traditional IRAs after the owner reaches that age.000 now. After that. the year you turn 71 if your birthday is after June 30 — you have until the following April 1 to take your first mandatory IRA distribution.500 for 2007). you can contribute up to $45. www." you can contribute an extra $5. your life expectancy and the amount in the account at the beginning of the year.388. If your firm offers the new Roth 401(k) option. You have until April 15. you'll owe the 15% capital gains rate on $5. you can steer part of it to your 401(k). Note this: One of the advantages of Roth IRAs is that the original owner is never required to withdraw money from the accounts.000 worth of stock that you bought years ago for $5.700 at the parents' rate.

get crackin'. Starting your own business can be financially rewarding. But you get this break only if your company has adopted the grace period. of course.65% Social Security tax. Whether you have a separate office facility or are using a portion of your basement or a converted den. www. That rule used to create a stampede to drug stores and dentists and optometrists each December as employees with money to spend rushed to use it before it disappeared. for example. so don't go overboard. Now. as late as March 15. which allows you to put away more into tax-deferred savings for your retirement. Technology and the ease of telecommunication have prompted more consultants. There are allowable deductions for daycare. Take the deductions allowable. however.ZENWAY. rather than leave it for estate taxes later. The catch is the notorious "use it or lose it" rule. including computer software for your business and upgrades to your system. You can give up to $12. If you wish to start with more than $2. nanny care. But don't cheat yourself by being unduly afraid of the use-it-or-lose-it rule. 7 TAX TIPS Flex plans are fringe benefits offered by many companies that let employees steer part of their pay into a special account which they can then tap to pay child-care or medical bills. if you don't use it all by the end of the year. If this is open season at your company — when you must decide how much to set aside for 2008 — be aggressive. you’ll be able to shift some of your income that would be taxed at a higher rate to their lower tax bracket without being hit with kiddie taxes. in fact. coaches. the IRS allows companies to build in a two and one half month grace period. you can deduct the percentage of your home used exclusively for business purposes. and anything else business-related. and many such full-timers are punching their own time clocks and making excellent incomes.000. however. You should consider setting up a self employed qualified retirement plan (i.554 of salary to pay. Another important year-end point about flex plans. because college financial aid could be affected by their income. This is a very powerful tax-saver… so powerful. contractors and freelancers to take business matters into their own .000 away tax-free to each person you choose.000 funneled through a flex plan can pay bills it would take $1. By avoiding a 25% federal income tax bracket plus the 7. Below are ten helpful tax tips to help lessen Uncle Sam's tax bite: Deduct home office rental and utility expenses. $1. Self-employment is no longer a means of making some extra money but a full-time career. Keep receipts for all deductable expenses. babysitting and any other type of childcare provided while you are working. subscriptions.e. Be generous at gifting if you can.COM INC. postage and shipping costs. The self-employed have unique tax concerns.zenway. Take this percentage off of your mortgage or rent payments as well as your utilities. That allows employees to spend 2007 set-aside money. This is typically for retirees with significant assets who want to gift money now. By having them do some work for you. SEP IRA) not only for tax purposes but for the same of saving money for your retirement years. 2008. Deduct child care costs. you can opt for a Keogh plan. if you've got leftover money that has to be spent by December 31. Be careful. deduct those phone bills. that you can actually forfeit 25% or more of the money and still come out ahead. Put your (over 14-year-old) children on the payroll. You don't want to forfeit a dime. dues. You have to decide at the beginning of the year how much to contribute to the plan and. If you have a phone exclusively used for business. you forfeit the excess. Make sure you understand your firm's rules and. Keep receipts and good records of business travel and other expenses including office supplies. Set up a retirement plan. The advantage is that money that goes into the account avoids both income and Social Security taxes.

however. deduct half of these payments on your 1040 form. or if you have a good tax tip that we failed to mention here. Being self-employed. you pay both the employer and employee portions of Social Security or call 646. ©Copyright 2008 by Brian Zen. All rights reserved. www.8 ANY QUESTIONS? PLEASE CALL US AT: 646. please email me at: brian.0887 Employ family members. If you have any question.zenway.388.388. You can deduct medical expenses for your entire family by employing them . You can. Don’t forget to deduct half of FICA.zen@gmail.0887.