8 Steps to Cut Your 2004 Tax Bill

December 12, 2004 -- As the end of the year approaches, it will soon be time to focus on tax time. But in some cases, that will be too late and can prove more costly. According to Andrew Schwartz, CPA and founder of the MDTAXES Network of CPA's who specialize in providing tax and accounting services to health care professionals, "It's not too late to cut your 2004 tax bill. Prior to December 31st, everyone - particularly health care professionals - should consider the following:
1.    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 away up to $13,000 ($16,000 if 50 or older) into your 401(k) or 403(b) plan. If you're self-employed, consider setting up a Solo 401(k) by 12/31.
2.    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.
3.    Consider selling your non-retirement investments that have decreased in value since your capital losses can offset other capital gains realized during the year (including from your mutual funds), and then can be used to offset up to $3,000 of wages and other income.
4.    Send in your January, 2005 mortgage payment early enough so it will be processed prior to 12/31/04. By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier.
5.    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 2005.
6.    Pre-pay your projected state tax shortfall if you'll be itemizing your deductions and won't be subject to the alternative minimum tax.
7.    Pay off your medical bills if your total medical expenses exceed 7.5% of your income and you itemize.
8.    Evaluate whether you'll save any taxes by postponing 2004 income or deductions into 2005 or by accelerating 2005 income or deductions into 2004.

Other valuable tax information specific to healthcare professionals can be found on www.mdtaxes.com. The MDTAXES Network is an affiliation of CPAs throughout the country that specializes in the tax planning and preparation for young health care professionals.

8 Steps to Cut Your 2004 Tax Bill

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8 Steps to Cut Your 2004 Tax Bill

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