Alice Bullwinkle has some advice for you. "Pay attention now; save money when April 15 rolls around," says the manager of personal financial counseling for the accounting firm of Ernst & -- Young in Denver.
Who wants to think about taxes now? There are still about 90 days until the end of 1991. Time enough later.
If you put it off, you may lose some advantages -- and some money -- when you file.
Regardless of your income, anyone who files a tax return should do at least some simple planning. "Tax planning should be done any time something happens that could affect your future tax returns," the Internal Revenue Service advises. That could be buying or selling a house, refinancing your mortgage or the birth of a child.
Your planning might be as simple as reviewing your 1990 tax return. If you received a large refund, you may want to cut the amount of income tax withheld by your employer.
On the other hand, if you ended up owing Uncle Sam a lot of money, increase your withholding so you will pay a little more throughout the year rather than taking one big hit, the IRS advises. You can do this any time during the year. Just ask your employer for a W-4 "Employee's Withholding Allowance Certificate." (Keep a copy for your records.)
Ms. Bullwinkle suggests that you lay the groundwork, commit time to the planning effort, and perhaps pay for professional advice to get you started.
In general, there are two tax-planning strategies: You can defer your income, or you can accelerate your deductions.
The "most powerful" way to defer income, Ms. Bullwinkle said, is to contribute as much as you can possibly afford into a qualified retirement plan. If you are self-employed, it would be a Keogh Bretirement savings plan. If your employer offers a 401(k) or a 403 (b) retirement-savings plan, pump as much in it as possible.
"You can contribute a considerable amount of money, and it reduces your taxable income right off the top," Ms. Bullwinkle said. The other advantage is that you are socking away money to grow for your own future. "There's just no comparison how quickly funds will grow in a tax-deferred environment," she said.
Other things to think about:
* If your compensation includes a bonus, ask to receive it after Jan. 1.
* Consider offsetting investment gains with losses. For example, Ms. Bullwinkle points out that if you own a mutual fund that has appreciated greatly this year, and you also own shares of a stock that has lost ground, you might want to sell the stock (for less than you paid) to offset the gain in the mutual fund.
* Think about investing in tax-free municipal securities. "Right now, there's a big advantage to investing in the municipal market. Because so many are coming to market, they are offering very competitive rates," Ms. Bullwinkle said. A double-A rated, tax-exempt, one-year muni bond is paying about 4.55 percent, compared with Treasury bills offering 5.52 percent. For a taxpayer in the 28 percent tax bracket, the equivalent yield for a taxable security would have to be 6.79 percent, which is very hard to find, she said.
* Defer income by buying short-term certificates of deposit or Treasuries that aren't due until 1992. A six-month CD won't mature until March 1992, just in time to have money to pay any taxes owed.
The other strategy is to accelerate your deductions -- in other words, to take more off the bottom line. You can consider:
* Pre-paying state, local and property taxes. They are deductible in the year in which they are paid.
* Lumping medical expenses. For example, taking elective surgery and paying for orthodontics for your kids could add up to a deduction in excess of the 7.5 percent of adjusted gross income floor, Ms. Bullwinkle said.
* Giving to charity. In the age of credit cards, you can charge a charitable contribution and take the deduction in the year it was charged, even if you don't pay off the credit card until next year.
* Moving expenses. If you moved this year, you can deduct the full amount of the expense of transporting your stuff from place to place. Some other items associated with moving are only partly deductible, so check with an expert (and that includes free advice from the IRS).
A final word of advice: Don't be fooled by what look like little things. "Individual savings may seem small, but the cumulative effect can add up to sizable savings," Ms. Bullwinkle says.