Many Americans dread April 15 when the deadline looms for filling out federal and state income tax returns. Those who owe money at tax time frequently vow that they'll be better prepared "next year." It's a popular New Year's resolution for people to promise themselves that they'll keep better records and pay closer attention to possible tax-saving measures. Unfortunately, many people don't know how to follow through with that commitment.

Income Tax Planning Is a Year-Round Effort

Get organized. Create a file for records you'll need at tax time. Many stationery or office supply stores sell notebooks with separate pockets for various tax-related items. Start by filing your pay stubs. Don't wait until your employer issues a W-2 income and withholding statement at the end of the year. Keep a running total of your income and withholding. These figures will provide a rough idea of how much you expect to have earned and withheld by year's end. Remember to include sources such as bonuses, stock sales and your spouse's earnings when computing income. If you're on track to earn more-or withhold less-than last year, it could mean that you'll owe more money at tax time. There might still be time to adjust your withholding at the company where you work. On the other hand, a big refund means you've given the government an interest-free loan all year.

Self-employed? Remember, the rules differ if you're self-employed. Deadlines for opening a Simple IRA, SEP-IRA or Keogh plan may be different. You'll have greater withholding and reporting responsibilities.

Save those receipts. Get in the habit of saving and filing receipts for your purchases and charitable contributions. Contributions to qualifying charities will probably be deductible. (Don't forget your non-cash donations of clothing and household goods.) Medical and dental costs, including prescription medicines, may qualify for deduction, depending on the amount. Similarly, other types of expenditures may be deductible if they meet specific criteria. Keeping track of what you spend will help in setting up a household budget, even if expenses are not deductible.

Be alert to changes. Will you be welcoming a new baby into the family during the tax year? Do you or a family member expect to start college? Have you received an inheritance or other monetary windfall? Do you expect to buy a home, get a raise, start a new job, get married or divorced? These are just a few examples of life-changing incidents that should prompt you to re-examine your income tax strategy.

Pay attention to deductions. Some commonly overlooked deductions that may or may not apply to your situation include:

• Using a home equity loan or home equity credit line instead of credit cards. Unlike the interest you pay on credit card debt, the interest you pay on your mortgage or home equity loan is probably deductible-and comes with a more attractive interest rate.
  
  
• Maximizing your retirement savings and pre-tax contributions at work. Do you qualify for an IRA? Does your employer offer a 401(k) or 403(b) retirement saving account? Consider having the maximum amount allowable deducted from your paycheck, especially if your employer offers "free money" in the form of a lucrative match. Your company might also offer other pre-tax benefits. Check with your human resources professional.
  
  
• Meeting deduction thresholds. Medical expenses and some other types of expenses only qualify as deductions if they meet a specific percentage of your adjusted gross income. If you anticipate large medical bills this year, consider going ahead with other medical expenditures in the same tax year. Bundling these expenses could help you meet the government's threshold for deductible expenses.
  
  
• Don't forget job-hunting expenses. Are you looking for a job? If so, you can probably claim a deduction for related expenses, even if you're currently employed. Overlooked job-hunting expenses that may qualify include postage, mileage and resume preparation. Check your IRS tax preparation booklet or professional tax adviser to see which expenses qualify.

See the "big picture." Every financial decision you make can potentially affect other aspects of your financial life. Taxes are no exception. Income tax planning should be done with regard for your general financial planning, insurance planning, employee benefits planning, investment planning, retirement planning and estate planning. Make income tax planning a year-round endeavor.

Consider consulting a professional. A financial services professional may be able to identify tax savings that you overlook. Many financial planners are trained to see your tax strategy in the context of your overall financial abilities, needs and goals. Remember, the tax planning advice you receive could be deductible.

Ever wonder how your personal finances stack up against those of upper-income Americans? Below are some trends among the top 25% of households, by income, in the United States.

What Are the Top Financial Goals? When it comes to planning their personal finances, the number one goal of upper-income consumers of all ages is preparing for retirement. After that, their priorities differ by age. People in the 20-39 age group say their second most important goal is to manage or reduce their debts. Mid-life consumers, age 40-54, want to focus on building an emergency fund. Those on the cusp of retirement, ages 55-69, say travel and vacations.

Over-confident Americans? Nearly two-thirds of upper-income people rate themselves above average when it comes to personal financial knowledge. However, fewer than half of those people claim they're satisfied with how well they're planning and handling their financial affairs.

What's the Biggest Asset? Upper-income americans say real estate equity makes up more than one-third of their assets. That percentage has grown steadily, from 29% in 1999 to 34% currently.

Who's Afraid of Mutual Funds? Not America's upper-income consumers. Recent mutual fund trading scandals aren't causing these investors to jump off of the mutual fund bandwagon. Stock and bond mutual funds still account for 12% of their assets, compared to 13% in 1999 and 2001. Below is a breakdown of upper-income Americans' assets.

• Real estate: 34%
  
• Retirement savings plans: 25%
  
• CDs, money market, savings account: 11%
  
• Stock mutual funds: 9%
  
• Individual stocks: 6%
  
• Bond mutual funds: 3%
  
• Annuities: 3%
  
• Individual bonds: 2%
  
• Other assets: 2%

Putting It in Writing. Thirty-seven percent of upper-income consumers have a written financial plan. That number increases as people age and acquire greater net worth. For example, 48% of individuals with a net worth of at least $500,000 have a written plan, as do 47% of those closest to retirement, age 55-69.

A Nation Online. Among upper-income consumers, overall Internet use has reached 92%. That's up from just 76% five years ago. Just more than half of those surveyed use the Internet for financial reasons. When it comes to using the Internet for financial purposes, most upper-income users say they go online to monitor their savings and investments.

Men Love Their Internet. Upper-income men are more likely than their female counterparts to use the Internet to obtain financial information. In fact, men are more than twice as likely to access the Internet daily for that purpose.

Additional Information:
Results were taken from CFP Board's 2004 Upper-Income Consumer Survey. For details, visit www.CFP.net/2004survey.

If you suspect you're the victim of identity theft, the Federal Trade Commission has a site just for you at www.consumer.gov/idtheft.

The FTC site offers advice about where to file complaints, which documentation you'll need and how to minimize or prevent further damage to your credit or personal reputation.

Identity theft results when someone uses your personal information-your name, Social Security number, credit card number or other identifying information, without your permission, to commit fraud or other crimes.

Identity theft can be costly for victims, who sometimes spend years-and a lot of their money-trying to clear their names and credit records. Victims are sometimes refused loans, denied jobs, education, housing or cars, or even arrested for crimes they didn't commit.

For more in-depth information on preventing or recovering from identity theft and help with specific problems, read Identity Theft: When Bad Things Happen to Your Good Name or visit the FTC site at www.FTC.gov/bcp/conline/pubs/credit/idtheftmini.htm.

In addition, CFP Board's Financial Alerts page at www.CFP.net/learn/alerts.asp provides a guide to resources for managing common consumer problems such as fraud and deceptive sales practices.

Often, financial services firms and advisers market products and services to prospective clients through free or low-cost seminars. Seminars can be useful, but how can you evaluate what to look for and whether the seminar will be helpful for your situation?

Marketing seminars can be a great place to learn about the terminology, issues and trends in personal finance. Seminars are also great if you want to get to know insurance agents, investment advisers, planners or other financial professionals before you chose to work with them one-on-one. But be wary of a presenter who claims to have the answers to all of your financial planning needs, even before he or she knows anything about you.

Your financial needs and goals are unique. No single financial product-regardless of how good-is appropriate for every individual.

One measuring stick you can use is to ask whether the seminar presenter follows the Financial Planning Practice Standards. Those standards dictate how planners should develop integrated financial plans, calling upon them to:

communicate compensation methods and possible conflicts of interest,

establish a mutual understanding with a client of what will be done,

gather, evaluate and use client data, and

develop and recommend individualized solutions.

Such personalized attention exceeds the scope of what can be covered in a seminar or in a transaction focused on a product rather than advice for you as an individual. A few steps will help you make more informed choices about which financial planning seminars you attend.

Be specific about your financial needs and goals. Know what you want before attending a seminar, and be specific. If your goal is to enjoy a "comfortable" retirement, what does that mean to you? At what age do you want to "shift gears" or retire? What income will you need in retirement? What income will you need as you make those life changes? Does "comfortable" mean just taking care of necessities or being able to travel and fund other priorities?

Avoid "cookie-cutter" solutions. A company's products or services might be right for you but they may only be part of the picture. Look for someone who will fit a plan to your situation, not squeeze your situation into their plan.

Check the presenter's background. If the presenter is an insurance agent, contact your state insurance commissioner to make sure the presenter is appropriately licensed. If the presenter focuses on investment topics, contact the SEC or NASD. Determine whether he or she has ever been publicly disciplined. If he or she claims to be a CFP® certificant, check www.CFP.net/search to make sure the planner holds the CFP certification and to find out whether he or she has ever been publicly disciplined by CFP Board.

Financial planning seminars can be a great source of information and can help you decide whether a product-or a financial planner-is right for you. Just remember to learn what you can about the presenter before the seminar and be skeptical of products that sound too good to be true. Above all, keep what you learn at a seminar in perspective with your individual goals, needs and personal financial plan.

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