Wednesday, December 06, 2006

2006 end of year tax planning activiites

This weekend I'm gathering my financial papers and documents to send to my accountant for end of year tax planning.

The goal is to identify any last minute adjustments and other activities to minimize our tax burden and position favourably for the future.

Here are some of the actioins I anticipate:

  1. Maximize 401k contribution available with my employer
  2. Maximize individual 401k contribution for my company (to the extent #1 doesn't cover it)
  3. Make retirement contributions for my children (open new account)
  4. Consider opening and making coverdell education savings account for my children (and contributing) - need to investigate this one further - should broaden the available retirement investments - do we qualify - ask the accountant?
  5. Finalize / formalize charitable contribution records for this year - we've given away alot ~ $14.5k
  6. Spend some money ($400) setting up new internet based business venture (initial spending)
  7. Very possibly moving as many of my accounts as possible from Schwab over to Vanguard and consolidating several duplicative accounts - this will make available more low cost index investment options.
  8. Possibly liquidate my cash-value insurance investments and move them over to my new investment accounts at Vanguard (non-sheltered).
  9. I've already sold a good portion of my Shanda Interactive investment (SNDA) - harvest a loss close to $3,000. That money has been reinvested in better performing ETFs. I'll sell the balance in January 2007 to harvest the next loss. If I'm thinking correctly the $3k can be written off against current income - so I'll recover about $1200 of the loss.
  10. While I'm at it, rollover my IL Bright Start Savings 529 plan to New York's or another state plan.

This could lead to a very paper intensive December. Especially since I'll be travelling for a portion of it. One of my first activities will be to open the various accounts to ensure they will be available before year's end.

Does anyone else have any other tax planning activities to recommend?

Have a great week, Makingourway


2million said...

I am impressed with your chartible giving levels - I certainly need to put extra focus on this going forward. My goal is to increase my giving every year, and I do, but I don't yet give at the level you do.

Just curious now that you took this position in the big company - how will your business fair (you mention contributing to the ind. 401(k))? Will this be the end of the business (or income at least)?

makingourway said...

Alot of my giving has been driven by a need to shed accumulate personal property. Our actual cash giving is a much smaller percentage of our actual giving - don't want to misrepresent our activities.

One of the things that we take the time to do is research the market value of everything we're contributing. Most people simply don't bother.

I'm keeping the company, but it will be fairly inactive - I'm redirecting it's activity away from research toward media content development - something I can partner / outsource with third parties.

Also, i'd like to make it a vehicle for employing my children in the future.


Anonymous said...

Curious about retirement contributions for children. How does that work?

makingourway said...

My children are employed by my corporation on a part time basis. As such they are paid a salary (mainly for participating in advertising / promotional activities). This money is deposited into Custodial ROTH IRA's for each child.

If our savings ability improves, I will create individual 401ks for each of them and try to max it out. However, we do not have enough money yet for such a purpose.


rev said...

Don't just cash out your Cash Value Life Insurance, else we will have to pay taxes on all of the earnings that have been sheltered. Better to do a 1035 exchange to an annuity. Ask your insurance company. You may be able to do this with Vanguard.

makingourway said...


Excellent point. I've investigated this matter already. Actually I have a unique situation: Capital loss (after fees) vs. capital gain. I've considered doing a 1035 exchange to preserve the capital loss (into Vanguard), however, my accountant tells me I'd have to hold the money in the annuity for another 20 years, as anyone liquidating an annuity before 59 1/2 has to pay a 10% penalty (in addition to taxes for any gains).