Fourth Quarter Tax Planning

Are you ready for the fourth quarter of the financial year?

Here are several questions you should be thinking about as the year comes to a close:

• Have you had a significant change in your financial situation this year? For example, if your employment situation has changed did you make the necessary withholding adjustment? 
• If you haven't, did you stop to consider the ramifications of not making the adjustment? You might be sitting on some holiday spending money.
• Do you might have some extra cash to add to your non deductible IRA or Roth IRA?
• Can you contribute some additional funds to increase your emergency savings account?
• On the other hand, you may owe more taxes than you budgeted for, and you may end up with a sizable tax bill in April. Have you already spent the money-that you will owe-because (you rationalize) "you got a refund last year?"

These are just some of the myriad tax issues you might face.

Here are five more year-end tax planning considerations:

1. Capital gains/losses: Review your investment's year-to-date financial performance. Those gains or losses may need to be taken into consideration at tax time next year.
2. Max out deferrals: If qualified, make a Roth contribution or a non deductible IRA contribution. Your contributions can be made until April 15, 2012 for tax year 2011, but-in this case, as in most-you're better off being early than too late.
3. Play "catch up": If you're age 50 or better and haven't been saving as much as you need to save for a comfortable retirement, you're in good company. Take advantage of catch-up contributions which can help you get caught up on your retirement goals.
4. Give to charity: It's also a great time to clean out those closets and make year-end cash contributions to shelters and your favorite charities. There are several worthy charities right here on Mercer Island, including the or the , with 100 percent of the proceeds going to support the city's .
5. Give a gift to someone you love: You can give $13,000 in cash, stocks or property to an individual. If you are married, you can give $26,000 without having to file a gift tax return. This can be a good strategy if you want to reduce your taxable estate.

Remember to discuss your specific tax concerns with your tax professional. In fact, now would be a great time to schedule an appointment with your tax pro to discuss your special situation, so that you can take advantage of all tax reductions to which you are entitled.