Five tax moves to consider now
- Remember that required minimum distributions from retirement plans are back this year. If you’re over 70½, your 2010 distribution must be taken by December 31 or a 50% penalty may apply. If you turn 70½ this year, you could wait until April 1, 2011, to take your first distribution. In deciding, consider the likelihood of higher tax rates next year and the fact that a delay means you’ll have two taxable distributions for 2011.
- With the $100,000 income limit dropped for converting a traditional IRA to a Roth, consider doing a conversion before year-end. You can elect to pay the tax over two years’ tax returns, 2011 and 2012, or pay in full on your 2010 return.
- If your business is planning to add employees soon, do so before January 1, 2011. If you hire someone who has been unemployed for a while, you could qualify for an exemption from social security payroll taxes on the new hire’s wages. Keep the new worker for at least a year and you could also qualify for a tax credit of up to $1,000.
- Start a pension plan for your small business. You may be entitled to a credit of up to $500 in each of the plan’s first three years.
- Review your portfolio and start thinking about offsetting gains and losses for the year. You can deduct an excess of $3,000 of losses against ordinary income.
For questions on tax moves to consider, give us a call.