The One Constant Thing in Life is in Fact “CHANGE” Itself:

With the 2012 year-end coming up fast, and the automatic expiration of many of the existing tax laws and lower tax rates that have been in effect for over a decade approaching just as fast…”change” and the uncertainty of the vacuum of information about the new tax laws and rates do not make it any easier to try to know what one should do in the face of such changes.

For this reason, this year it is more important than ever to attempt to plan ahead  – because of the new recent and sometimes “over-used”  – yet having serious tax implications “Fiscal Cliff.”

While no one at this point knows for sure what new tax laws and reforms are in store for 2013, there has been “talk” and some expected changes you may want to address before year-end – to see if there are any steps you may want or need  to take or opportunities to explore – before year-end 2012.

One thing is certain, there are substantial changes in the tax code which may require changes to long-time benefits you have enjoyed causing higher taxes, stepped up tax enforcement, or changes to the taxation of and  tax treatment of certain items such as distributions from pass-through entities and additonal new surtaxes on passive (investment) income.

There are also some new tax forms and reporting and increased disclosure requirements applicable for foreign bank accounts for business entities for 2012 – which started for individuals in 2011 and carry penalties starting at $10K as well as possible criminal penalties.

For some of the Fiscal Cliff planning and the expected possible increase to the capital gains rates…while no one has a crystal ball and can predict what is going to happen – there are some possible “protective steps” which can be possibly used for this year – BEFORE YEAR-END – such as taking a look at your Investment Holdings OUTSIDE your retirement account – to see if there are investments that have gone up in value as well to look if any have gone down in value (ie. they are at a loss compared to how much you paid for them originally.)  It is important to note that these gains and losses are “on paper” only and are UNREALIZED – which means they do not affect you for tax purposes – since they have not been ACTUALLY SOLD yet.

Normally, around year-end, you would only be looking for securities to sell at a LOSS to offset any gains you may have recognized by selling securities outside your retirement plans that went up in value since you purchased them…which is generally always a good step to take.

However, for the upcoming year-end 2012 – you may want to consider and talk with both your investment advisors as well as your tax professional (it is important to seek help from a credentialed tax professional such as a Certified Public Accountant.)   This may involve looking at your portfolio with your investment advisor before year-end to identify appreciated investments that can be sold at a gain and bought back to get a new cost basis –  which now will be  “RECOGNIZED” and are sales which must be reported for tax purposes – but only if those sales can be equally offset with actual sales of securities at a loss.

There is a generally a limit on security sales called “Wash Sale Rules” that only apply to sales of securities at a loss when you cannot buy them back again within 30 days or it erases the loss.  However, this rule does not apply currently to sales of securities at a gain – that you later buy back before 30 days.  This is not something possibly to do without help and guidance of an investment and/or tax professional.   This may not be applicable to for everyone’s individual set of circumstances and be applicable in every case.  In other words…”Kids don’t try this at home!”  

The office of David L Wrubel, CPA, PA can be of assistance in this capacity of assisting you along with your investment advisor to explore opportunities you may want to consider implementing before any year-end.

Should you have questions or need Business or Individual Tax Advice, or help with FIRPTA:

Our firm may be contacted at: 

PHONE:  (305) 672-4272  [4CPA]




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