November is a good time to look at what you can do to reduce your tax bill next April. There are many strategies that you can employ now through December 31 that will lower your tax bill and there are some things that you can do right up until the due date of your return to reduce the bill.

Income planning involves understanding what income you have received so far this year and what income you expect you will receive before year end. Is there any way to delay, accelerate or alter the amount of income you expect to receive? If so, you may wish to analyze the impact of receiving this income in 2008 or delaying the receipt until 2009. You may also want to take steps to alter the amount that you receive in 2008. The first part of this exercise is to account for what you have received thus far. This involves gathering your most recent pay stubs, your investment statements, and adding up all of the Social Security, pension, and other miscellaneous income you received. Look at your most recently filed income tax return, and compare each line item to your estimates for this year. You may have new items this year. The second part of this exercise is to determine what income you expect to receive and add this to your previous numbers. The last part is then to determine if there is anything you can do before year end to alter the second number. If you expect to be in a lower tax bracket this year compared to next year, consider accelerating the income. If you expect to be in a lower tax bracket next year, consider deferring the income. Here is a list of ways to do this:

Year-End Income Adjustments

• Contribute more to your retirement plan at work or for your business.
• Delay or accelerate bonuses or commissions that you may receive in either year.
• If you are self-employed, delay or accelerate billing.
• Consider investing cash in certificates or bonds with maturities in a later year.
• If you will be removing money from an IRA or retirement plan and this is not a required distribution, consider the impact of accelerating or delaying these.
• If you have not taken your required minimum distribution from your IRA for 2008, you must do this. If you turn 70 ½ in 2008, you may take this required minimum distribution in 2008 or up until April 1, 2009. Determine what makes the most sense given your current tax bracket compared to the tax bracket you expect in 2009.
• If you do not need any part of this IRA distribution, and would like to contribute this amount to charity, you may direct that the IRA trustee transfer the distribution (up to $100,000) directly to charity. This is called a Charitable IRA rollover. The tax laws were recently amended to extend this provision so that this is allowed up until December 31, 2009. The effect of this direct transfer is that the income is not included in your adjusted gross income (AGI). It is a good strategy for people who do not itemize deductions, or for people that do itemize and have itemized deductions that are limited based on their AGI. If you receive Social Security benefits, this strategy may reduce the Social Security benefits that are taxable.
• When you look at your investment portfolio, are there any positions you wish to sell? If so, determine if selling now or waiting until 2009 is preferable.

The next step is to look at your deductions. Start by determining what deductions you have locked in already and those that you expect to take before year end. There may be expenses that may pay in either 2008 or 2009. If you would like the deduction in 2008, write the check and mail it before year end. Here is a list of some items to consider:

Year-End Deduction Adjustments

• Review your state income taxes paid either through withholding or estimated tax payments. How does this compare to what the total liability will be? If you need to make adjustments, talk with your payroll person to adjust the withholdings or increase or decrease your estimated tax payments accordingly. If you are not subject to the Alternate Minimum Tax (AMT), it may benefit you to pay your state income tax liability prior to year end. However, if you are subject to AMT, it may not provide a benefit.
• Contribute to charity.
• Prepay your January mortgage payment if you would like to accelerate the interest deduction for this interest.
• If your itemized deductions are close to the standard deduction each year, you will not benefit from itemizing each year. Consider bunching your itemized deductions into one year and then using the standard deduction the next. You may do this by altering the timing of paying for certain expenses and taxes and charitable gifts. For 2008 the standard deduction amounts are as follows: Married Filing Jointly - $10,900, Single Filers - $5,450. There is an additional standard deduction for real estate taxes paid in 2008 up to $500 for Single filers ($1,000 for Married Filing Jointly).
• You may qualify for an income tax deduction for your IRA contribution. Your 2008 IRA contribution can be made up until April 15th of 2009. Speak to your tax preparer, or the IRS, if you have questions regarding the income limitations, contribution limits, etc.

If you think that your income tax situation will be approximately the same in both years, it is generally wise to defer paying the tax for as long as possible so that you have the funds to invest during the long run. Plan to have ready access to the funds needed to pay the tax liability when the time comes or you will risk severe penalties for underpayment.

These are just some tips that may help you. There are many other things that can be done to reduce overall taxes. If there is something you do not understand during this process, call your tax preparer, investment advisor, the IRS and/or the payroll person at your company. The key is to ask for help if you need it. Your tax preparer may charge you for this help, but if it lowers your tax bill, it may be worth it. Ask your tax preparer what he or she would charge for this tax planning help and if it would make sense to pay his or her fees in light of what you may save by having his or her help. Some tax preparers will answer many questions without billing for the time. Others will bill you for it. This exercise may have additional benefits for you such as helping you organize your financial information. This may help you save time during tax filing season. It may help you to see ways to change some things that will improve your overall finances but more importantly it may give you peace of mind.