Keep in mind, early contributions maximize the benefits received from the tax-deferred compounding of investment returns with retirement plans. Creating a charitable giving plan in advance provides you with the opportunity to make tax-wise contributions. For example, if you have held securities for more than a year and they have increased in value, consider giving those to charity. When you contribute appreciated property that you have held over a year, you not only qualify to deduct the property's full appreciated value, but you also avoid paying capital gains tax on the profit. Another strategy you might consider now for reducing your 2001 taxable income is to shift income to other family members.
Income generated by the gift is taxed to the new owner.
Don't wait until the last minute to consult with a CPA who can help you minimize your tax bill. However, some plans have more restrictions than others, and it is important for you to be aware of these. Basically, you set up a plan in each eligible employee's name and then contribute the same percentage of salary to each account, including your own. SEPs are funded solely by employer contributions and are not reported on the employee's W2 Form. A plan that covers an owner also must cover all eligible employees.