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Tax Planning Still Available in January

By Olga Ovnanyan, CPA, JSB Group

You may think that tax planning oportunities are no longer available, but this is not the case. There are still opportunities to save on last year's tax bill, even past December 31. Here are a few suggestions:


Retirement and HSA Plans:
• Individuals can make retirement plan contributions until April 15.
• SEP plans can be opened at any time and contributions attributed to last year.
• HSA contributions can be made until April 15 (remember catch-up contributions if you are 55 or older).

Avoid Wash Sale Rules!
If you had a stock sale in December that generated a loss and you re-acquire the same stock within a 30-day period, this loss will be considered "wash sale," and the loss from this stock will be disallowed. The cost basis of the wash sale will be added to the basis of the stock purchased in January. You want to refrain from purchasing the same stock within 30 days of the loss in order to avoid wash sale rules.

How to avoid an underpayment penalty:
The 4th quarter estimated tax is due on January 15th; however, if you do not make this payment but you file your tax return by January 31 with the full payment, you will not be charged an underpayment penalty for not making the 4th quarter estimate.

Trusts, Estates and Foundations
• Distributions from trusts and estates that are made within 65 days after the end of the year can be attributed to last year if the appropriate box is checked on Form 1041 when the return is filed.
• Private charitable foundations can make distributions related to last year's income until the end of this year.
• Estates for individuals who died last year can elect the six months later alternate valuation date on a timely filed estate tax return.

• Credit card charges made last year for deductible items are reportable on last year's tax return even though they are not paid until this year or later.
• Certain employer payments for deferred compensation plans are deductible last year even if they are not paid until this year, as long as they are paid by March 15. In such a case, the employee would report the income when received.
• Cafeteria plans and flexible spending accounts can make payments and reimbursements for last year's salary-reduction amounts or applicable expenses incurred and paid through March 15 if the plan permits it.

Employee Issues:
An employee who received employer-granted restricted stock or ISOs in December can make an election within 30 days after receiving the stock to report the income or AMT in the year the stock or ISO was received rather than when the restrictions lapse. This election is made pursuant to Internal Revenue Code Section 83(b). A timely January election will have the income taxed on last year's tax return.

For more information, or for help with your tax planning and tax preparation needs, contact Olga Ovnanyan at the JSB Group.

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