Need Some More Tax Deductions? It's Not Too Late

By Smith, Kevin | Pasadena Star-News, December 27, 2013 | Go to article overview

Need Some More Tax Deductions? It's Not Too Late


Smith, Kevin, Pasadena Star-News


LOS ANGELES » It's that time again - time for year-end tax planning.

For some that means spending more on work-related items or charity donations, which will generate a bigger tax deduction in the current year. Others may want to defer some of their income until the following year to reduce the current year's tax burden.

And then there's always "loss harvesting," where you sell off stocks, mutual funds or other investments to realize losses. Those losses can then be used to offset any taxable gains you have realized during the year.

It all makes sense. But many tend to drag their feet when it comes to making adjustments that could reduce their taxes, according to one Southland expert.

"The truth is, most people don't do anything," said Richard Novac, vice president of Richard Allen Associates Inc. a tax preparation service in Torrance. "But what they ought to be doing is a different matter."

Novac agreed that there are several ways a consumer can reduce their IRS hit.

"Someone could be close to the threshold for their medical expenses," he said. "Let's say your threshold is $10,000 and you spent $7,000 one year and $5,000 the next. You could lump those together into one year and that way you would get a deduction."

Deferring income to the following year can definitely reduce a consumer's current tax obligation, he said. But a taxpayer should first ensure that the change won't bump them into a higher tax bracket the following year.

Those are some of the easy strategies. But understanding the yearly changes in the federal tax codes? That's about as easy as understanding quantum physics, according to Novac.

"There are hundreds of thousands of pages of rules and regulations, and they add about 50,000 to 100,000 pages each year," he said. "No one - not even the people at the IRS - know it all."

Jodi Chavez, a senior vice president with Accounting Principals, said her agency supplies temporary and full-time employees to the finance and accounting industries, and many of the openings that crop up are with CPA firms.

"The buck stops with them," she said. "They have to be sure that all of their workers are up on the tax laws because they change constantly. The large CPA firms do a lot of their hiring in the summer because they want their team on staff by October when some of the corporate taxes begin coming due."

Chavez said Southland CPA firms hire hundreds of temporary workers each year to deal with the influx of people looking to file their taxes. …

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