It's too late for 2009 tax tips so start planning for 2010

Online, January 27, 2010 (Newswire.com) - It's that time of the year when stories abound on tax tips to help you reduce your tax liability. Unfortunately these stories are little help because they inform you that you can deduct this or get a tax credit for that. The only catch is that these tax breaks were on something you had to have done last year, and if you didn't do that something, then you are out of luck. Real tax advice is simple, plan ahead. For 2010 there are a couple basic things almost anyone can do to minimize their tax liability now and over the long haul. First, one size doesn't fit all, nor does any tax strategy result in the same benefit to everyone, so you need to either build a spread sheet to do the calculations or get an off the shelf professional financial planning software that incorporates an actual federal tax return in the retirement planning projection. This will allow you to see how much the tax benefit will be, and if you have the financial ability to take advantage of some of these tax planning strategies. A good retirement planning software that is available on the internet is ExecPlan Express, and though this is a tool used by professional advisors, accountants and insurance agents, it is easy enough for almost anyone to use, and consumers can download a trial version at www.execplanexpress.com that will provide you enough time to evaluate your own personal tax planning strategy. "Though professional planners are our core clients for the past 30 years" Says Jai Sawhney, President Sawhney Systems "we have seen a substantial number of individuals seeking out our product to manage their own personal finance and tax planning".

Once you have a way to project your income and estimate your tax liability, then you are ready to exploit two of the biggest breaks for 2010. First is a Roth conversion. Most people are aware of the benefits of a Roth, including tax free growth, no required minimum distributions and tax free distributions. There is also the benefit of providing liquidity for potential estate tax planning which may be important if and when the estate tax returns. The downside is that the conversion means you pay the tax now and the taxable income is on top of your current income, meaning that the income from the rollover may be taxed at your current tax bracket or even a higher one. However for 2010 income from Roth conversions will be split and applied over 2011 and 2012. This provides the consumer two benefits. First splitting over two years may help keep more taxable income in lower brackets, and secondly since the tax is not due for 2010, this provides a one to two year grace period before the tax is actually paid.

The other big tax break for 2010 is the reduced capital gains tax rates. If you are a retiree or any individual who has low taxable income or can defer ordinary income from 2010 to a future year, then this may be a real money saver. For 2010 capital gains rates are as low as 0% if you are in the 10% income tax bracket and 5% if you are in the 15% bracket. So a married couple both at age 65 not collecting social security yet, and taking the standard deduction could earn $100,000 in capital gains and owe less than $2000 in taxes, while in 2011 that same filer will owe almost $10,000, so if you have any appreciated stocks, this is the year to sell them.

With either of these strategies as well as almost any tax planning advice, you need to try it on first before you buy it. Though these breaks will benefit most people, they will benefit some people more than others, and the benefits maybe immediate or they be long term or both. The best way to really evaluate what will work best is to crunch the numbers with a retirement planning software package or seek a professional financial planner to
help guide you to the right answers.