Talk to Your CPA. Soon.

Writer Arthur Laffer, in a June 6 Wall Street Journal article, wrote: “On or about January 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply.” Laffer also said investment and payroll taxes may ascend on January 1 and cautioned that other, in-place tax cuts are set to expire on that date.

Another tax dread is the Alternative Minimum Tax (AMT) that, in 1970, was directed at higher-income earners and corporations, but, because the tax wasn’t indexed for inflation, a person’s present income may now make the (unfortunate) grade. Are you at risk? Bill Bischoff, on Smartmoney.com, said taxpayers with several children, interest deductions from second mortgages, capital gains, high state and local taxes, and incentive stock options are AMT vulnerable.

Additionally, the Internal Revenue Code Section 179 deduction that allows businesses to immediately expense new equipment (“certain qualifying assets”) acquired in 2010 may either end or decrease in value in 2011. This indicates that now may be the best time to buy new shop equipment.  You may also want to arrange for any remaining 2010 bonuses (or retirement funds) be paid to you before year’s end, when applicable, new taxes may become law.

Start planning now – call your CPA.