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Mark financial-planning calendar now for fewer headaches later

January handed out big surprises to those who watched their winnings mount in the stock market but overlooked the capital-gains tax bite.
Likely to feel particularly bushwhacked are latecomers driven to ride the wild bull in the comparatively safe saddle of mutual funds. Buying in high and late, they share the tax burden for the fund’s entire rise, profits they only read about in the headlines.
Form 1099-DIV will reflect the stunning second-quarter gains as well as that terrific third-quarter take that convinced them to jump on the bandwagon in the dead of December. Still congratulating themselves for waiting to see if Wall Street’s 1995 roll would last, they will find out by Jan. 30 that the tax man does not care when they took the plunge.
When the fund sold securities is what counts on the 1099-DIV.
Experts–investment advisers, financial planners and tax lawyers–know all about the phantom-profits problem and other ticking tax time bombs.
They are bracing themselves for a big backlash from novice investors this year, one marked by record market roll-ups that drew new cash, especially through the flooded mutual-funds conduit.
To paraphrase Ricky Ricardo, they got some ‘splaining to do.
And everyone has planning to do. When it comes to juggling even the most basic personal financial portfolio, timing is money.
Like primal-scream therapy that compresses big wads of fear into short bursts, marking special money worry times on your calendar can help.
Following are some possible hot spots.
Now
–New York state tax forms and instructions are available at some banks and many libraries, or order them by calling 800-462-8100.
–New York has a new estate-tax deduction–a maximum of $250,000 of the equity in the principal residence.
–The state also has lowered the threshold for businesses required to file sales-tax returns electronically, from $4 million annually to $1 million annually.
Jan. 15
–Fourth-quarter estimated federal income-tax payments were due to be paid Monday. Oops.
Big penalties attach if your 1995 withholding and estimated tax payments are less than 90 percent of the tax figure on your 1995 return. Some help that is, since you now are looking for ways to juggle that number. Meaning, of course, that you are completing a Form W-4, reviewing your withholding and evaluating your retirement-plan contributions.
If you made less than $150,000 in 1994, just make sure the IRS has as much of your money now as you paid in taxes for 1994. If you made more than that figure, it will take 110 percent of your 1994 tax liability to stay in a safe harbor for 1995 estimated tax payments.
–So severe are the penalties for late or mispayment of payroll taxes that it is vital for all businesses to keep tabs on whether they are required to deposit daily, semiweekly, monthly or quarterly.
Do not count on the notice of payroll-tax-deposit frequency sent in November 1995. If the Internal Revenue Service guessed wrong, you pay.
New businesses, unless they are really big, use the monthly deposit rules.
Set up your annual schedule now, depending on frequency of deposit. That is determined by the amount of employment taxes reported for the period July 1, 1994, to June 30, 1995.
But be ready to adjust your deposit schedule if your payroll changes.
–Another biggie for employers to schedule now is the deadline for deposit of workers’ 401(k) funds. Count on the current 90-day grace period tightening up to 30 days.
–Even the apolitical now have a nanny tax to worry about if they paid any household worker over the age of 18 more than $1,000 during 1995. For the first time, the Form 1040 personal income-tax return has a line for house- hold worker taxes.
Get a federal identification number from the IRS. Prepare W-2 forms for housekeepers, nannies, in-home health care workers and any other person who provides services in the home on a regular basis.
Now is the time to look at state taxes on these people, too. In order to get credit against federal taxes for state unemployment taxes, the state taxes must be paid before April 15. But some states penalize people who wait that long to pay up.
–Prepaid mortgage expenses, property taxes and state fourth-quarter estimated income taxes are among the tools that can be used to tamp down taxable income.
It may be too late for the class of 1995 to backfill many deductions over last year’s unexpected profits. Dumping your bad stock picks to get the loss, for example, had to be accomplished before Dec. 29 to count against 1995 gains.
But some just-in-time adjustments still are possible.
Self-employed people and business partnerships, for example, still can move up to $30,000 out of tax reach by contributing it to a retirement plan, usually called a Keogh Plan.
For 1995 deductibility, the Keogh Plan had to be in existence before Dec. 31. But participants often have until their 1995 tax due date to actually put money into the plan.
Even if no Keogh Plan was in place before the end of 1995, there still is a shot at a 1995 deduction through a Simplified Employee Pension Plan, as long as it is set up and funded before April 15.
Jan. 31
–File that annual federal unemployment-tax return.
–Hand out those W-2 forms.
–Form 1099s also are due, including the variant, Form 1099-R–which covers distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts and the like–and its brother, Form 1099-Miscellaneous Income.
February
Feb. 1
–This is a good date to apply for a Social Security number for any child born before Nov. 1, 1995, in order to claim dependent children on your 1995 return. Complete Form SS-5 and provide the Social Security Administration with an original birth certificate and another piece of identification showing the child’s name.
Feb. 15
–Employers must collect new W-4 forms–employee’s withholding allowance certificate–from each employee who claimed exemption from withholding in 1995.
Feb. 16
–Employers have to start withholding from any employee who claimed exemption from withholding in 1995, but has not handed over a new Form W-4 for 1996. The old form has expired.
Feb. 28
–Employers must file Form 1096, the annual summary and transmittal of U.S. information returns, along with copies of 1099s.
Feb. 29
–Employers must send transmittals and copies of tip income and other income for tax year 1995 to the IRS.
–Send copies of household worker W-2 forms to the IRS, with transmittal form W-3, same as a business.
March
Since this is a light month, it may be a good time to run through a checklist of random things to note on your calendar:
–If a youthful driver turns 25 or gets married, remember to notify your insurance agent.
–If your car turns 4 or 5 years old, you may want to drop collision coverage.
–If you are at least 55 years old, sale of a principal residence can bring a substantial income-tax benefit. If you are within a few years of that age, it may pay to wait to sell your home.
–If you are under 59/ , you still can avoid the 10 percent excise penalty on early withdrawals from your IRA through a periodic plan that continues at least five years or up until the time you turn 59/ , whichever is later. Do not attempt to perform this trick at home, however. It takes a trained professional.
–If you are turning 65, get your Social Security records in order and apply for Medicare several months in advance.
April
April 15
–File your 1995 individual tax return, or get an extension.
–Pay first-quarter 1996 estimated taxes and make a defined-benefit Keogh contribution for the same period.
April 30
–Employers’ quarterly federal payroll-tax returns are due.
May
May 10
–If all payroll taxes are deposited when due, employers get an extra 10 days to file their federal payroll-tax return.
June
June 15
–Second-quarter estimated tax payments are due.
July
July 15
–Second-quarter defined-benefit Keogh contributions are due.
July 31
–Employers’ quarterly federal payroll-tax returns for the second quarter are due.
–Form 5500, the annual report of an employee-benefit plan, must be filed, if applicable.
August
Aug. 15
–If you got an extension on 1995 personal income taxes, file now, or get another extension.
September
Sept. 15
–Third-quarter estimated tax payments are due.
–This is the time to start 1996 year-end tax planning by outlining your investment, IRA and Keogh status, and reviewing your needs.
It also may be a good time to start negotiating income-deferral strategies with your employer.
Things to look at this point include donating appreciated stocks to charity to put a lid on capital gains while avoiding transaction costs.
Shifting income to dependent children age 14 and older can help stash it in a lower tax bracket.
Depending on your circumstances, an investment in a visit to a professional might be the best thing to schedule now.
October
Oct. 15
–Those who obtained a second extension on their 1995 personal income-tax return, file now.
–Third-quarter defined-benefit Keogh contributions are due.
Oct. 31
–Employers’ quarterly federal payroll-tax returns for the third quarter are due.
November
–Retroactivity may muddle the picture on the 1995 capital-gains tax and the alternative minimum tax.
–Also facing change are the deduction for self-employed health insurance, and estate- and gift-tax limits. And that is only on the federal level.
December
–This is the deadline month for raking through 1996 to make April 15, 1997, a happier day. For your assignment, see September.
In addition to dumping the bow-wows out of your stock portfolio to offset the gains on all the winners you picked, make sure your company puts its intent to make a charitable contribution on its agenda now.
In order to claim the deduction, corporations must record their intent to donate excess or overstock inventory to charity before the fiscal year closes. Current law gives companies 75 days to actually deliver donated goods to charity.
(Contributors to this partial personal financial guide include: AM&M Planners Inc.; Joseph Votava of Nixon, Hargrave, Devans & Doyle LLP; Paychex Inc.; Chase Manhattan Bank N.A. Trust Department; and Bonadio & Co. LLP.)

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