Dear Clients and Friends:

Now is the best time of year to do tax planning, because we can now combine general tax planning with year-end tax planning.

Here are some money-saving ideas you may want to put into action before the end of 1999:

• Postpone income until the year 2000 and accelerate deductions into 1999 to lower your 1999 tax bill. Postponing tax generally is one of the main goals of year-end tax planning. This year it is particularly relevant because many deductions, credits, and other tax breaks that are effective in 1999 are phased out over varying levels of adjusted gross income (AGI). This process actually requires you to prepare mock up tax returns for both years to see where the best place is for the income or expense. Utilizing tax preparation software can make this process somewhat simplified. Utilizing a tax professional to aid in the planning process will also make the process simplified. Contributions to Roth IRAs are made with after-tax dollars, but after a 5-year period that begins with the year for which you make a contribution to any Roth IRA, certain withdrawals are tax-free. To start this 5-year period, it is important that you make a Roth IRA contribution this year (if you're able to under the rules), even if the contribution is small.

• Make gifts to family members to take advantage of the $10,000 gift tax exclusion that applies for each donee each year. (You get no carryover of any unused exclusion ‹ it is a "use it or lose it" benefit.)

• Bunch expenses into one year to maximize your itemized deductions.

• Time capital losses and capital gains to make the best use of the special rules for these items.

This tried and true strategy is made more complicated by the new (mostly very favorable) tax rules that now apply to capital gains.

There are many non-tax factors that could influence your year-end planning. These factors include a significant raise or bonus, a change in jobs, changes in the amount of your business expenses or itemized deductions, adoption or birth of a child, a death in the family, or a change in your marital status.

These are just a few of the possibilities. Planning now will avoid surprises. Planning now will enable you to create the tax return as opposed to just preparing it.

If you would like to find out more, please give me a call at (315) 363-3338.

Very truly yours,

G. William Hatfield
Certified Public Accountant
Certified Financial Planner