Tax Planning

NUTS AND BOLTS OF
TAX PLANNING

Does your financial life need some fixing up? If so, it may be time to review the nuts and bolts of tax planning.

START WITH A BUDGET
Don't wait until the last minute to get ready for your 2002 federal income-tax bill - especially if you expect to earn more income this year than last year. It's smart to make a taxable income budget for the year, including the income you expect to receive through the end of 2002 and the tax deductions that you may be entitled to. Once your taxable income for 2002 is projected, an estimate of your 2002 tax bill can be calculated using the current tax rate schedule.

AVOID IRS PENALTIES
Your total payments to the IRS over the course of the year should be at least 90% of your 2002 tax liability. Alternatively, your payments can be based on the taxes you paid for 2001. If your adjusted gross income (AGI) in 2001 was $150,000 or less ($75,000 or less for married filing separately), your minimum required 2002 payment is 100% of your 2001 tax liability. If your 2001 AGI was over $150,000 ($75,000), the minimum required 2002 payment is 112% of your 2001 tax. If you ignore these rules, the IRS may charge you interest and penalties, unless the tax shown on your tax return (after withholding) is less than $1,000.

ADJUST YOUR WAGE WITHHOLDING
If you are employed, check one of your recent pay stubs to see if your tax withholdings are putting you well on your way to paying your 2002 estimated tax. If too much or too little is being withheld from your pay, ask your employer's payroll department for Form W-4, Employee's Withholding Allowance Certificate, and complete it right away. The sooner you submit a new W-4, the more accurate your withholding is likely to be.

MAKE QUARTERLY ESTIMATED PAYMENTS
If you receive significant income from sources other than your job, or if you are self-employed, you may have to make quarterly estimated tax payments directly to the government. Make your quarterly payments by April 15, June 17, September 16, and January 15 (2003).

CONTRIBUTE TO YOUR IRA
For 2002, you may contribute up to $3,000 to your traditional or Roth IRA (assuming you're otherwise eligible), or up to $3,500 if you're age 50 or older. April 15, 2003, is the deadline for your 2002 IRA contributions.

TAKE REQUIRED MINIMUM DISTRIBUTIONS
Generally, by April 1 of the year after the year you turn age 70 1/2, you must begin to withdraw funds from your traditional IRA and other tax-advantaged retirement plans. The IRS recently simplified the rules for determining the required minimum distributions (RMDs) from such plans. Whether you contributed to such an account yourself, or you inherited an account, the recent IRS changes may make calculating your RMD easier and may even lower the amount that you must withdraw each year.

GIVE TO CHARITY
If you own appreciated stock, consider donating it to a charitable organization. You'll avoid paying income taxes on capital gains, and you will be able to deduct the full value of the stock as a charitable contribution, subject to limitations based on your income. If you still like a particular stock and want to remain a shareholder in the company, you can always buy new shares in the same company after making a charitable contribution of stock.

SEE US BEFORE A MAJOR TRANSACTION
Nearly every major business transaction and many personal financial decisions you make have tax implications. Once a transaction is completed, you generally must live with the tax consequences. To steer clear of a costly tax mistake, ask for our advice before you participate in the transaction.

PLAN AHEAD
With early tax planning, you are more likely to be prepared for April 15 next year. Now that we are well into 2002, you may wish to ask one of our professionals to get out a wrench and tighten a few nuts and bolts in your tax plan.

For More Information Contact:

Bucheri McCarty & Metz LLP
2366 W. Boulevard
P.O. Box 2147
Kokomo, IN 46904-2147

Telephone: (765) 236-2300
FAX: (765) 236-2333
Internet: info@bmmcpas.com

NUTS AND BOLTS OF TAX PLANNING

NUTS AND BOLTS OF
TAX PLANNING