Lawyers Can Still Save on Their 2005 Tax Bill

 

Lawyers Can Still Save on Their 2005 Tax Bill

Although 2005 is quickly winding down, there is still time to take advantage of these tax saving opportunities for 2005.

Woburn, MA (PRWEB) December 14, 2005 -- Although 2005 is quickly winding down, there is still time to take advantage of these tax saving opportunities for 2005.

“It's not too late to cut your 2005 tax bill, before December 31st,” assures Andrew Schwartz, CPA, founder of www.LawyerTaxes.com, an affiliation of CPAs throughout the country that specializes in tax planning and preparation for law professionals.

Here’s how:
·    Increase your 401(k) and 403(b) contributions if you haven't been contributing at the maximum rate all year. This year you can put up to $14,000 into your 401(k) or 403(b) plan at work. Anyone 50 or older by December 31 can make additional “catch-up” contributions of $4,000. Contributing to a 401(k) or 403(b) plan at work is one of the best tax shelters available to you during your working years.

·    Set up a Solo 401(k) if you’re self-employed and have no employees who work more than 1000 hours per year, except your spouse. With these tax advantaged retirement accounts, you can contribute $14,000 ($18,000 if 50 or older) plus 20% of your net self-employment income, up to $42,000 for 2005. If you are 50 or older, the max increases to $46,000.

·    Take a look at your withholding and instruct your employer to withhold additional taxes if you haven’t had enough taxes withheld during the year to avoid getting hit with an underpayment penalty.

·    Consider selling your investments held in non-retirement accounts that have decreased in value since your capital losses can offset other capital gains realized during the year (including from your mutual funds). Excess losses can then be used to offset up to $3,000 of wages and other income. Make sure to wait at least 31 days before buying back a security sold at a loss, or the IRS will disallow the loss under the "wash sale" rules.

·    Send in your January, 2006 mortgage payment early enough so it will be processed prior to 12/31/05. By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier.

·    Clean out your closets and donate your clothing and household items to a charitable organization, since "non-cash" contributions are deductible if you itemize. Don’t forget to get a receipt. For gifts of money, making your donation by credit card before December 31st allows you to deduct the donation on this year's return, even if you don't pay your credit card bill until 2006. And you always have the option of donating appreciated investments to charities. You get to claim your donation based on the value of the assets donated, without paying any capital gains taxes on the appreciation.

·    Review your miscellaneous itemized deductions. These items, such as unreimbursed employee business expenses and investment fees, are deductible to the extent they exceed 2% of adjusted gross income (AGI). Items paid with credit cards are deductible in the year charged. Beware of the Alternative Minimum Tax (AMT), however. A listing of professional expenses common to lawyers is available at www.LawyerTaxes.com/busexp.php.

·    Pre-pay your projected state tax shortfall if you'll be itemizing your deductions and not subject to the AMT.

·    Pay off your medical bills. Medical and dental expenses are deductible if they exceed 7.5% of your income. Payments for services not yet performed are not deductible.

“Finally, you should evaluate whether you'll save any taxes by postponing 2005 income or deductions into 2006 or by accelerating 2006 income or deductions into 2005,” explains Schwartz.

Andrew D. Schwartz, CPA is the editor and a major contributor to www.LawyerTaxes.com, a website that provides income tax and financial planning information geared towards law professionals. Schwartz has provided financial planning advice in interviews with various media, including the Washington Post and Wall Street Journal. He is available for interviews.

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Press Contact: Stacy Gillis
Company Name: LawyerTaxes.com
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Website: www.LawyerTaxes.com