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A few tips as the 2014 tax season approaches

The new year is here, and while the celebrations for 2014 were robust, in a few months many of those people who celebrated will be groaning as Tax Day approaches. As we mentioned in our last post, with every new year there are numerous tax laws and rules that change — may they be major changes or minute, intricate changes. It’s no different this year, as a number of tax laws will change for people with high incomes and significant capital.

For example, a 3.8 percent tax will be applied to someone if their modified adjusted gross income exceeds $200,000 or the taxpayer’s net investment income (whichever is lesser). This applies for single filers. In addition, filers who earn more than $400,000 if single (or $450,000 combined if joint filing) could be hit with a tax rate of 39.6 percent.

These are just a couple of the major changes that are being applied this year. So, what can high earners do to try to alleviate their potential tax troubles? One big step is to take a look at your portfolio and see where you can better invest. Moving some money around could save you tax dollars in the short-term. In addition, if you have the chance to obtain stock options, it may be wise to defer those payments to a later year when your income levels out.

Of course, high earners aren’t the only ones who need help come tax time. There are plenty of people who are contacted by the IRS with prying questions about their filing. This can often make people panic and think they are getting audited. It could mean that — but you don’t know for sure. Consult an experienced tax attorney to make sure your rights are protected, and also to help represent you if you negotiate a tax deal with the IRS.

Source: Investment News, “How to get a jumpstart on 2014 tax planning,” Darla Mercado, Dec. 31, 2013