1. Review all entries in my accounting software to make sure there are no errors, computer or human. Last night I caught some computer errors. Believe it or not, a person can categorize something correctly in their software, and it can show up in the wrong area. I split my income into employer income (W-2) and self-employed/contract income so I can calculate self-employment tax amounts. Somehow, there was Schedule C income that showed up under my W-2 category. There was no entry problem, so I eliminated the category class and tried again until the computer put the income into the correct category. (Necessary for step 2).
2. Review books to make sure depreciation and mileage have been taken. Fairly self-explanatory, but many self-employed people miss these non-cash expenses when putting together their year end tax records. Also, make a print copy of the mileage log for records.
3. Cut year end tzedakah checks, or not? Make an additional mortgage payment or not? Unless I'm mistaken, we still are operating in the arena of uncertainty for 2011 tax planning, but it looks likely that for at least two years tax brackets will remain unchanged. Those tax payers sitting on the edge of two brackets or on the edge of credit phaseouts, will need to crunch the numbers and make the best informed decision they can despite the uncertainty. Deadline: December 31, 2010. Below are the 2010 tax brackets. My apologies for format and leaving off head of household. Exemptions remain the same, as does the standard deduction for all but head of household ($50 increase).
Tax Brackets as per Bank Rate
Married Filing Jointly Single
10% Bracket $0 – $16,750 $0 – $8,375
15% Bracket $16,750 – $68,000 $8,375 – $34,000
25% Bracket $68,000 – $137,300 $34,000 – $82,400
28% Bracket $137,300 – $209,250 $82,400 – $171,850
33% Bracket $209,250 – $373,650 $171,850 – $373,650
35% Bracket Over $373,650 Over $373,650
4. Run a final calculation for estimated taxes owed at both the Federal and State levels and pay up possible shortage. Baruch Hashem this year was better than expected. During the 4th quarter, in anticipation of the "Bush Tax Cuts" expiring, I worked to push income into 2010. So, now it is time to make sure that we are paid up by January 15, 2011.
5. Figure out how to spend down the excess funds in the Flex Spending Account. I've never overfunded an FSA, but I can't complain this year because the reason for the excess funds were all positive. Nevertheless, the money is there for the spending and I need to put together a plan. Over the counter reimbursements will end in 2011. So, while I can deal with dental appointments, visions appointments, new prescription glasses or sunglasses purchases, and physicals in 2011, if I plan to stock up on a few OTC medications, I better plan a trip to the drug store soon. Deadline: March 15, 2011. But, I prefer to be on the safe side, so the earlier the better.
6. Fund the Coverdell Plans by the end of the calendar year. These plans might also be called IRAS,
7. Fund IRA or ROTH IRA. Deadline: April 15, 2011.
8. File that growing stack of papers, make sure tax letters are on file for any donation over $250. I'm certain this note just pertains to me. Certainly everyone else has kept to their schedule of daily or weekly filing (smiles). Deadline: Before putting the tax return in the mailbox.
Other tax payers might be interested in re-evaulating the portfolios, selling loosing stock, writing up a new will, making sure their insurance coverage is adequate, or creating a new budget and financial goals. My list is far more barebones, but should keep me busy enough.