Three Weeks Left to Save on Business, Personal Taxes

Taxpayers have three weeks left to make their final moves for the 2006 tax year.

According to financial consultant David Reyes Jr., it is not too late to develop a tax strategy.

Reyes, founder and chief executive officer of San Diego-based Reyes Consulting Inc., works with CPA firms, attorneys and other financial advisers to design and implement tax minimization strategies for high net worth individuals, families, land developers and business owners.

His practice also specializes in tax reduction strategies for highly appreciated real estate.

His average client has gross revenues of $5 million to $500 million, and 80 percent are in Southern California.

“We specifically deal with strategic high level tax planning strategies for clients working with, (or) in concert with their existing CPAs and attorneys,” said Reyes.

While specialists are busy through April 15, Reyes is busiest the last few weeks of the year.

“We are doing things that significantly impact taxes for that year,” said Reyes. “If you’re seeing your CPA or adviser in January, February or March it’s too late, there is nothing you can do.”

He reviews financial information, including current personal tax returns, trust documents, IRAs, stocks, bonds, mutual funds, insurance policies and all other financial holdings, to minimize the tax liability, maximize cash flow and protect the assets of clients up until the eleventh hour.

“The number one thing I see with closely held business owners is their pension plans are underutilized,” Reyes said.

According to Reyes, his average client contributed $42,000 to his or her pension plans before his recommended shift to a contribution of $250,000 to $300,000.

Reyes has a background in estate and tax planning and holds multiple licenses and registrations in the financial, real estate and insurance fields.

He has implemented many strategies to defer or eliminate taxes accrued with the sale of real estate with many clients.

Bill Malone, tax partner with the San Diego office of Deloitte Tax LLP, said he agreed there is still time to save on taxes.

Malone said individuals still have time to pay their 2006 state income taxes, the April portion of their property taxes and make charitable contribution before year-end to increase deductions on their 2006 return.

Malone said most planning for corporate taxes takes place during the year, but last-minute analysis of transactions that took place during the year is needed to ensure tax savings have been maximized.

“Certainly cash based corporations are in the position a lot like an individual to pay things before year-end and get deductions,” said Malone.

It’s Now Or Never

The Internal Revenue Service said time is running out for individuals and couples filing jointly to complete strategic tax planning. The IRS offers tips at its Web site.

It says for many filers’ tax planning may mean adjusting withholding allowances to increase take home pay, gathering records for deductions, including child care credit or considering last minute charitable donations.

In addition, for investors, tax planning may mean deciding which stocks to sell or buy, or contributing to a tax deferred retirement plan.

The IRS reminds taxpayers that they can deduct IRA contributions and moving expenses, students can deduct interest on college loans and spouses may deduct alimony payments.

Among the common deductions itemized are state and local income taxes, real estate taxes and home mortgage interest.

Taxpayers should keep a record of their contributions.

New Tax Laws

A new law will allow domestic partners to file joint or separate state tax returns on terms similar to those governing traditional married couples.

The standard deduction for taxpayers who do not itemize deductions in most cases is higher for 2007 than it was in 2006.

The amount depends on taxpayers’ filing status, whether they are 65 years old or older and other factors.

The standard deduction for head of households will be $7,850, for married taxpayers filing jointly $10,700, and married taxpayers filing separately or singles $5,350.

For Social Security tax, the maximum amount of 2007 wages subject to the tax has increased to $97,500 from $94,200 in 2006. For Medicare tax, all covered 2007 wages are subject to the tax. This represents no change.

For 2007, the standard mileage rate for the cost of operating a personal vehicle is increased to 48.5 cents per mile for business miles driven versus 44.5 cents per mile in 2006.

Taxpayers can deduct for a single item or a group of items donated to one or various charities as long as the total value is more than $5,000 and if an appraisal for the donation is properly conducted.

A new law being implemented by the IRS requires tax appraisals be done by a “qualified appraiser.” The IRS rules note that consumers should have an appraisal completed within 60 days of the date of donation.