Generally, tax planning is beneficial to those taxpayers whose circumstances have substantially changed or those who have had large swings in income. The following are examples of situations that can lead to unexpected tax liability and potential underpayment penalties:

• You reached age 65, are still working and started to draw Social Security benefits. There is a good chance those benefits will be taxable.
  
  
• You have a substantial increase in income because of a bonus, a large increase in pay, or changed jobs.
  
  
• Your spouse began working. Typically, the withholding tables do not compensate for two people working, so you underwithhold, leaving a tax liability.
  
  
• You have a large gain from selling stocks, a rental, land, or other capital asset.
  
  
• You retired this year, altering both your income and withholding.
  
  
• Your itemized deductions will be substantially reduced because of reduced contributions, paying off a home loan, reduced business expenses, etc.
  
  
• You exercised an employer stock option.

These are frequently encountered situations where tax planning may be able to eliminate or substantially reduce your tax liability and penalties. If I can be of assistance with year-end planning, please contact me.