Making Taxes Less Taxing

12/28/2015


Ben Franklin's famous quip about the inevitability of death and taxes still holds true today, and becomes more relevant at this time of year.

Fortunately, with some forethought, you can make the process less taxing. Below we present five tips to lessen the pain of income-tax season:

• Harvest tax losses. In today's market, you probably have some stocks with unrealized losses. Consider offsetting gains from earlier this year with the sale of losers by year-end — particularly equities that don't earn solid Quadrix Overall scores.

• Rebalance. Over time, portfolios tend to become lopsided, with the weighting of asset classes deviating from your long-term target allocation. December is a good time to review those allocations. If you must rebalance, consider the tax implications of your sales, so you can make an educated choice about whether to sell now or wait until 2016.

• Give the gift of stock. If you wish to make a charitable contribution, consider donating stocks with long-term gains rather than cash. That way you capture the tax deduction and also avoid paying tax on any capital gains.

• Take your IRA distribution. The deadline for required IRA distributions is Dec. 31. If you haven't taken yours yet, call your broker today and avoid the 50% penalty for being late.

• Don't let taxes drive the bus. Sure, we all want to pay less to the government. But if a stock is past its prime and the only thing keeping you from getting out is a massive gain, sell the stock. After all, isn't making a profit the object of the exercise? Declare victory, pay the taxes, and reinvest the proceeds in you next winner.

TAX DATES EVERYONE SHOULD KNOW
Deadline   Activity
Feb. 1, 2016 Businesses must provide Form W-2 to employees; Form 1099-IND, 1099-DIV, and other versions of Form 1099 to investors; and most versions of Form 1099-MISC to contractors. If you expect such a form and haven't received it by mid-February, contact the sender.
Feb. 16, 2016 For a few types of Form 1099 not due Feb. 1, businesses must file by this date. 
Feb. 17, 2016 If you were exempt from withholding last year, that exemption ends on this date. If you wish to claim an exemption from income-tax withholding for 2016, file your Form W-4 before Feb. 17.
Apr. 18, 2016 Federal income tax returns are due on this date. If you plan to file for an ex-tension, your Form 4868 must be in by this date as well. As always, while you can delay filing your return, the taxes are payable in April. To the IRS, "due" means "in the mail," so make sure your paperwork is postmarked by April 18.
Oct. 17, 2016 Investors who received a six-month extension on their federal income taxes must file a return by this date.

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