Tax planning at the end of the year involves a few basic ideas:

1. if you can, defer taxable income to the following year;
2. if you can, accelerate tax deductions into this year by prepaying; and
3. using up tax-free funds in flexible spending accounts.

It's also important to keep in mind that some tax-saving strategies can be put on hold to next year, while others need to be acted on this year. Here's decisions you can safely hold off on making until April 15th, 2010:

• Contributing to an traditional IRA, Roth IRA, SEP-IRA, solo 401(k), or Health Savings Account for 2009.

And by way of contrast, here's a sampling of deduction-decisions that are made only during the calendar year:

• Charity & church donations,
• Medical expenses (including FSA reimbursements),
• Deduction for sales tax paid on a new vehicle, and
• Deductions for business-related expenses.

The four major tax software publishers have released versions in time for you to run some preliminary tax calculations before the end of the year. This can help you figure out the benefit of any year-end tax moves. I have not fully tested these programs, but they are consistently among the best of the tax applications on the market:

• CompleteTax
• H&R Block AtHome (formerly TaxCut)
• TaxACT
• TurboTax

Giving to charity can be a rewarding change of pace during the holiday season. And it makes a great year-end tax strategy as well. If you are close to being able to itemize, donating cash or household goods to charity can help put you over the threshold above your standard deduction. Gifts to charity should be made with some common-sense tips in mind. First, get a receipt. If the IRS ever asks for proof, you'll need a receipt to substantiate your charitable donations. Second, make sure that the organization is a bona fide not-profit. You can ask to see the organization's tax-exempt status, or you can search the database of tax-exempt organizations found in Publication 78 on the IRS Web site. Third, consider giving by check or credit card, as you'll have an added level of backup documentation in case you lose the receipt the charity gave you.

Donations of household items, clothing, food, and other goods are also tax-deductible. The thing to remember is that the donated property must be in good condition or better. And you can take a deduction for the fair market value of the item. If you need help figuring out the item's worth, you can check out the valuation guidelines found inside deduction-tracking software, the Salvation Army Valuation Guide, or the Goodwill Valuation Guide (3-page pdf).

More tips on charitable giving:

• Holiday Gift-Giving Tips
• 8 Ways to Give to Charity

Individuals who are self-employed may want to consider setting up a 401(k) plan before the end of the year. Many brokers and financial institutions offer solo 401(k) plans for self-employed people. Unlike a SEP-IRA, solo 401(k) plans can potentially provide for larger tax-deductible savings contributions. The term "solo 401(k)" is used to describe retirement plans that cover only sole proprietors who file a Schedule C, owner-operators of LLCs, and shareholder-employees of C- or S-corporations; solo 401(k) plans are not designed to provide coverage for small businesses with employees who are not owners.

Like SEP-IRAs, a solo 401(k) can be funded retroactively by filing deadline (April 15th for Schedule C or LLCs; March 15th for corporations). And like SEP-IRAs, funding for 401(k) plans can be extended (to September or October 15th). This is one reason why I really like SEPs and 401(k)s, as it gives both the tax professional and the client flexibility in making last-minute tax decisions, plus an opportunity to shift deductions to an earlier year.

401(k) plans do differ from SEP-IRAs in how the contribution level is calculated. For 2009, the maximum funding levels will look like this: Read more...