April 17^th is a month behind us now and hopefully your accountant had some well-deserved rest and relaxation because the uncertainty surrounding future tax law will probably lead them to a few sleepless nights between now and year-end.  Some tax provisions, like qualified charitable IRA distributions, have already expired while the current income and capital gains tax rates are set to expire at the end of this year.  Here’s a list of some of the more common expiring and new tax provisions.

The politics of a presidential election year and an obstinate Congress make trying to predict how they will address the potential tax increases and spending cuts pure speculation, especially with the headwinds facing the global economy.  No action could lead to something the New York Times referred to as “taxmageddon.”  But as we saw in 2010, a deal could be reached in late December that retroactively affects any tax planning done that year as well as changes the future tax landscape.

So what should you do?  This is a great time of year to do some big picture financial planning. 

This is the time of year to ask your accountant for advice, not April 13^th and not December 27^th. 

Take stock of your current situation by projecting what your income and tax situation is likely to be under current law.  Then start to think about some of the strategies you could use to address potential tax code changes, including:

Could it make sense to bring income forward?  E.g., recognizing income, incentive compensation, stock options, or capital gains (including the sale of a business) this year instead of a future year; reconsidering a Roth conversion; distributing C-corp dividends.

Could it make sense to delay itemized deductions like charitable contributions if your tax rate will be higher in a future year?  Or could it make sense to accelerate itemized deductions if you may be affected by the itemized deduction phase-out rule? 

Could it make sense to change ownership of certain assets for income or estate tax purposes?  E.g., equalizing estates for unmarried partners, gifting to younger generations outright or through trusts, or moving tax-inefficient investments to tax-deferred accounts.

Of course, it is important not to get overzealous and let the “tax tail wag the dog.”  Decisions need to be made with a holistic view of your particular financial and tax situation over a period of years.

And I hear accountants scream “Remember Section 4981A” like Texans yelled “Remember the Alamo,” where individuals with substantial IRAs took early distributions to avoid an excise tax included in the Tax Reform Act of 1986 only to have existing balances excluded from the tax.

So although you may implement any tax-saving strategies today, a little planning now will make you better prepared to deal with whatever may lie ahead.

NOTE:  For your reading pleasure, see the Joint Committee on Taxation’s report detailing a list of 140+ expiring tax provisions.

The holidays can be a wonderful time when we gather with family and friends, but it can also be a time when we witness the aging process first hand.  Just this past week, my dad began to ponder about how much longer he and my mom might be able to host the family for Christmas – that it is just beginning to be too much for them.  It made me reminisce about when my parents took over the duties from my grandparents and then the care my mom provided to my grandmother dealing with Alzheimer’s in her later years.

Why am I sharing this?  Well, it all reminded me of a blog I recently read from a local law firm about “the promise” we sometimes make to our parents that we will never put them in a nursing home.  As much as we would like to believe our parents can live out their golden years in their own home, at times, some other level of care is necessary for the well-being of the parent and/or the caregiver.

I can identify with and appreciate Terry’s perspective on the role of caregivers and the support they need.  They face difficult decisions that will impact the parent as well as the rest of the family, but those decisions can be just a little bit easier to have some of those tough conversations ahead of time.

Although we have already had preliminary discussions about planning for her long-term care, it might be much tougher to convince my mom to concede hosting Christmas.

Best wishes to all on a happy and healthy 2012!

For more information:

“Caring for an Aging Parent,” an article about developing a long-term plan for elder care.

Children of Aging Parents, a website to help caregivers cope and provide support and information.

The Alzheimer’s Association, a website to help caregivers learn more about Alzheimer’s Disease and provide support, resources and care information.