Tips for the Upcoming Tax Season

You can start the year off right with a bit of good planning ahead of time by making sure both you and your family are financially fit for the new fiscal year--and maybe reduce your tax bill in the meantime. Here are a few things to consider when preparing yourself:

-If you're thinking of investing in mutual funds for long-term or retirement savings, consider a variable annuity. After all, you've got the 1099 forms for the previous year already from any mutual funds you own. If you find yourself with a tax bill this year, you'll most likely wait until April 15 to pay it, to give the money extra time to work for you. What if you were able to wait 10 or even 20 years to pay? This way you control just when you pay taxes on your money so you can get the most out of your investment earnings. Variable annuities provide tax-deferred investments. You don't pay taxes on the earnings until you actually withdraw the money, and you don't receive a tax assessment during the accumulation.

You're also free to shift money between the funds within your annuity without incurring taxes, and you're able to invest in VAs without tax consequences. Many mutual funds pay taxable dividends, so you'll be taxed on any gains from stocks or funds sold during the year. Remember that variable annuities typically carry expense charges, administrative fees, and deferred sales charges that can reduce tax-deferred performance. Any withdrawals of the tax-deferred earnings are taxed as ordinary income and surrender charges may apply, along with a 10 percent tax penalty for withdrawals before age 60.

-If, you haven't used all the dollars in a pre-tax medical or child care spending account by the end of the year, you could forfeit all remaining money. If you have money remaining, you may want to schedule an eye, dental or physical exam, or stock up on prescriptions.

-Take time to review all your insurance and savings plans, including homeowners, auto, life, health and disability insurance, retirement plans and investments to make sure you have done everything necessary to prepare for the future. Insurance protects against unpredictable events like accidents, disability, or death.

-Consider a variable annuity. Only annuities can provide guaranteed income for life upon retirement, and many variable annuities offer a considerable amount of flexibility. Guarantees are subject to the claims-paying ability of the insurance company, so be certain to choose a company with a solid financial background.

-If financial planning is important, try consulting a financial planner to discuss strategies for saving taxes, maximizing your investments, and ensuring you cover as many contingencies as possible.

-If you haven't maxed out your pre-tax contribution, ask if you can put part (or all) of your bonus into this account.

-A charitable contribution, such as to your church, alma mater or other worthy cause, can be tax deductible. You can give away up $10,000 annually without incurring the federal gift tax.

Taking these things into account will help you achieve your goals to defer income, accelerate deductions and take advantage of tax credits. Remember, tax planning involves more than just reviewing the past year; it also means looking ahead to the following year too.