To Clients: Tax deadlines are looming

(November 2009) Clients are often busy shopping for holiday gifts in December, so why not send them a letter reminding them that buying presents isn’t the only thing they need to do by the end of the year. This template letter explains to clients a few of the tax-related things they need to do before they ring in 2010.

Download a Word version of the template here.

Dear [Client’s name]:

If you’re like many people, you’re probably waiting until April to start thinking about your taxes. However, by the time taxes are due, it’s usually too late to realize tax-saving opportunities.

Now is the time to determine whether there are any tax breaks you can take advantage of, by acting before the end of the year. With this in mind, there are a number of tax-related questions and issues we may need to discuss soon, so that you get the most out of this tax year. For example:

Are you giving to charity? Three years ago, the Conservative government eliminated the tax on “in-kind” donations of securities, mutual funds and segregated funds to registered charities. If you’re planning to give cash, property or securities, it is important to make sure that all donations are made by December 31 in order to realize the tax benefits on your 2008 return.

Do you have any non-registered mutual fund purchases planned? Many mutual funds distribute their earnings at the end of the year, so investors who purchase them in December will be liable for taxes on those earnings as if they had been invested for the entire year. We can get an estimate of this year’s distributions to determine whether it is worthwhile to postpone non-registered mutual fund purchases until January.

Did you open a tax-free savings account? Tax-free savings accounts came into effect on January 1 of this year. Hopefully you’ve already opened one, but if not, it’s time to activate one now. You can save up to $5,000 in a variety of investment options and, if you need those dollars at any point, you can pull them out tax-free.

Can you benefit from tax-loss selling? With most portfolios taking a hit this year, there’s a good chance you could take advantage of tax-loss selling. In short, losses on certain assets — mainly stocks — can be offset against capital gains that were realized during the previous three years. Now’s the time to review your portfolio and determine whether there are any equities for which you should lock in the losses before year-end.

In addition, final payments must be made before December 31 in order to claim a tax deduction in 2009 for various items, including alimony payments, child-care expenses, interest expenses on money borrowed to earn investment income, and investment counseling fees.

If you would like to book an appointment to discuss these or other potential tax-saving strategies, please don’t hesitate to contact me directly.

Sincerely,

[Your signature]

[Your name]

(11/17/09)