2009 is almost over, and it’s time to start thinking about any unfinished financial plans you have for this year. Time is running out to finish whatever needs to be done for your finances personally, for your company and for your employee benefits.

Listed below are six items that are important for everyone to review at the end of each year, all of which are applicable to individuals, families and business owners alike.

1. Year-end planning

• Compare your actual gross income for the year with your already-submitted quarterly estimates. Should your last submitted estimate for January 15, 2010 be the same as the others you’ve sent in 2009 so far?
• Any gifts to children or grandchildren (stock, cash or other asset) in 2009 must be decided upon in the next two to three weeks. Also, have you already gifted all you want to each of your preferred charities?
• Changes to the estate tax law were supposed to be passed in Congress in the third or fourth quarter of this year. So far, there have been no amendments to the estate tax provisions that were implemented several years ago. As it stands now, the exemptions of $3.5 million for each person will be eliminated, and the estate taxes will be zero in 2010 and $1 million per person in 2011. I still don’t believe that Congress will let this happen, but anything is possible. This will have a very large negative impact for each of you when it comes to your estate planning. We’ll have to wait and see what happens on this issue.
• Look at your long-term capital gains and losses for 2009 and work hard to maximize the benefits. FYI – the capital gains tax rate of 15% may go to 20% in the next year or two.
• Check to see if you are going to be in the Alternative Minimum Tax (AMT) category for 2009. If you will not be in the AMT, many of your tax-saving options for this year will be reduced.

2. Talk about a Roth IRA

• In 2010, many people will be able to transfer their IRA assets to a Roth IRA for the first time. A Roth IRA has advantages for some people because during retirement the income that you take out of the Roth IRA is tax free. This idea does not fit everyone, but is especially attractive for people in their 40s or 50s who plan to retire in their 60s or 70s, and whose income puts them in the highest tax bracket.

3. Add to college 529 plans or college trusts

• For those individuals who have children or grandchildren and have established and contribute to either a state-sponsored college 529 plan or to irrevocable trusts for them, contributions for 2009 must be made this month (December). If you have Uniform Gifts to Minor Accounts at a brokerage firm, contributions to these accounts for 2009 must also be made this month. Keep in mind that in Indiana and some other states, you receive a state income tax savings for these contributions.

4. Look for more tax deductions

• Talk to your CPA about all of the tax deductions that apply to you and be sure to take advantage of them this month. For example, consider making an extra mortgage payment so that you get a higher interest deduction for 2009, or give an old car, clothes or a TV set to charity (be sure to get a receipt to verify the donation) to help maximize your deductions.

5. Maximize retirement account contributions

• If you haven’t contributed anything to your retirement account(s) this year, consider doing so quickly. If you have already put some money into a 401(k) plan or an IRA, you should consider adding more to be as close to the maximum contribution amount as possible. If you have a SIMPLE IRA, make sure you put the maximum into your account. Maximizing your contribution to a tax deductible retirement account not only gives you a tax deduction this year (based on your current tax bracket), but it also allows those funds to accumulate (tax deferred) each year in the future. Don’t miss out on reducing your income taxes and increasing your net worth in December.

6. Start discussing your asset allocation for 2010

• December is a good month to take a close look at the first and second quarters of the new year, and to do some asset repositioning planning. Some of you would like to see a lot of growth in your investments over the next 10 or 20 years, but with today’s economy that will be challenging to do in the near future. Many of you want to increase your income, earn more dividends and have more financial security. This is why planning during this bad economy is very important. Talk to your advisors about all of the year-end tax saving options you should be taking advantage of and which changes in the first quarter of the new year they suggest you consider.

By Gary Pittsford, Castle Wealth Advisors, LLC