Tuesday, July 3, 2012

IRS compliance trends for the next decade

A $450 billion annual tax gap prompts Treasury to pursue aggressive compliance techniques. Earlier this month, I attended the AICPA Practitioners Symposium and TECH+ Conference, along with more than 1,600 CPAs and marketing professionals. The three-day conference offered more than 150 interesting technical and marketing sessions. One such session was presented by Jim Buttonow, vice president of product development, and Brian Howell, product manager, for Beyond415, a web-based software developed by New River Innovation Inc. of Greensboro, N.C. Buttonow started his presentation by asking the participants a question: “What does an average firm spend 66 days a year on, but only bills for 28% of the work?” His answer: “The flood of hundreds of millions of IRS notices being sent annually.” The IRS sends more notices annually than the number of taxpayers, so businesses and individual taxpayers can all expect to be contacted more than once by the IRS. The increased volume of notices sent and audits conducted by the IRS and state and local tax authorities unnerves almost any client, and it can put a strain on the CPA-client relationship—even when the CPA didn’t make any errors. Buttonow outlined the ongoing “tax gap” problem faced by Treasury. The problem is complex. The United States has one of the highest tax-compliance rates in the world, with an estimated underground economy of 8.7%, versus other countries’ higher rates, e.g., Russia, 45%; China, 20%; and Great Britain, 16%. However, because of the massive U.S. economy, the combined cost of noncompliance from underreporting, nonfiling, and nonpayment is projected to be a whopping $450 billion annually. With an estimated U.S. deficit of more than $1.3 trillion for fiscal year 2012, according to the White House Office of Management and Budget, collecting a substantial portion of the $450 billion tax gap would allow Congress to keep tax rates down and/or retain certain programs—so the IRS is clearly focused on reducing the tax gap. According to the IRS’s latest study, the projected federal tax gap has three causes: 84% is related to underreporting of taxable income and taxes on returns; 10% is related to underpayment of taxes reported by taxpayers or assessed by the IRS; and 6% is related to nonfiling of tax returns. Because state taxable income is generally tied to reported federal taxable income (assuming a return is filed), tax gaps are also present at the state level—as well as growing deficits resulting from the four-year economic downturn. To close the federal tax gap and help reduce the federal deficit, the IRS is continuing to focus on some of its tried-and-true compliance enforcement techniques. It is also testing some new techniques. The following is an overview of areas the IRS is likely to focus on during the next decade, according to Buttonow: 1.Do more with less. For fiscal year 2012, the IRS’s budget was cut by $305 million. Even though the IRS is expected to receive a budget increase in 2013, it will have more programs to administer, including implementing provisions of the new health care law. The IRS employs more than 90,000 people and has more than 192 data systems. Streamlining these systems and using technology for compliance initiatives are some of the IRS’s primary objectives. Technology provides the IRS with the best return on investment (ROI). The cost for GS-4 agents to handle mail audits is as low as $11.75 per hour, yet these audits can average returns of $4,578 per hour. Auditors who handle field audits are paid approximately $24 per hour, and these audits yield an average of $330 per hour in new assessments. Therefore, we can expect to see more computer-matching and mail-driven compliance programs now and in the future as the IRS seeks to leverage information and technology to close the tax gap. 2.Increase compliance rate to 90% by 2017. The voluntary compliance rate is the amount taxpayers actually pay versus what they should report and pay. The most recent IRS study of U.S. taxpayer compliance rates was completed in January 2012 and measured noncompliance on 2006 tax returns. The study reported a voluntary compliance rate of 83.1%, which falls within the 83% to 84% range that has prevailed for the past 27 years. The IRS goal for 2009, which will be measured in three years, is 86% voluntary compliance. The IRS hopes to raise the compliance rate to 90% by 2017, which would reduce the current $450 billion tax gap by about 40% to $266 billion. Every 1% increase in compliance would generate at least $27 billion—so a 6% improvement in the most recently published compliance rate of 83.1% would be expected to increase revenue by $184 billion. 3.Focus on high-yield assessments. Areas in which the IRS has found significant underreporting noncompliance will continue to be a focus of compliance activity, including audits, in coming years. These areas include: ◦High-income individuals. ◦Worker classification: W-2 vs. independent contractor. ◦S corp. losses claimed in excess of basis. ◦Rental property losses: passive vs. active, as well as basis issues. ◦General small business underreporting of taxable income. ◦Form 1099 filing compliance. ◦Review of international taxpayers/FBAR, etc. 4.Increase tax document matching. The IRS is pleased with its ability to computer match documents such as Forms 1099, W-2, etc., which results in a 99% compliance rate in reporting those amounts. However, for certain small businesses (e.g., S corps., partnerships, Schedule C filers), the compliance rate is only 44% because not all small business revenue is subject to computer matching of tax documents. As reflected above, automated compliance systems and office audits can produce significant ROI. In 2011, 70% of compliance audits were conducted via mail, and 30% were field audits. In 1995, the ratio was 54% mail audits to 46% field audits. Based on ROI, this trend toward more automated, higher ROI compliance activity will continue. It is interesting that the annual volume of IRS notices has increased sevenfold since 2001. The IRS issued 201 million taxpayer notices in 2009, up from 30 million in 2001. These are invariably hardcopies, so we can conclude the IRS does not have a very effective paperless program. 5.Simplify the Code. There have been 4,426 tax law changes in the past 10 years, and the Internal Revenue Code gets more complex every year. Some portion of the tax gap is related to valid confusion among taxpayers as well as some CPAs. Simplifying the Code would greatly reduce unintentional errors. Buttonow noted that any progress toward tax simplification this year is highly unlikely, but late congressional activity to extend the Bush tax cuts is more likely. Any late changes to the Code would add to unintentional errors. 6.Regulate and deputize tax professionals. The IRS is spending resources in educating and regulating tax preparers to remove “bad players” in the tax preparation arena and, where necessary, is imposing and expanding significant penalties on preparers and their clients. The IRS’s focus on requiring tax preparers to meet certain requirements and register to be part of a database has thinned the ranks from 1.2 million tax preparers to 850,000 registered tax return preparers. In theory, this raises the bar and compliance level of those remaining tax preparers. Of course, there will always be a “gray market” element with tax preparers who aren’t registered in the database, but the IRS is watching. 7.Mandate disclosures. Over the past few decades, the IRS has increased the level of detail tax preparers must include in their returns. Failure to make those disclosures can result in civil penalties and sometimes even criminal penalties. Examples include: ◦Schedule UTP, Uncertain Tax Position Statement. ◦Form 8275, Disclosure Statement. ◦Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). Buttonow points out that these trends will also be adopted in whole or in part by state and local tax authorities. There are 50 states, 3,033 counties, 19,492 municipalities, and 16,519 towns throughout the United States—all looking to plug increasing deficits. The bottom line? CPAs need to inform their clients that the IRS and other tax authorities are aggressively auditing taxpayers, and that clients can expect an increase in notices and audits. In many circumstances, compliance activity has little to do with how the return was prepared. The IRS and states are increasing compliance activity because they now have the ability to do so easily with more information and more sophisticated, automated compliance systems. With a $450 billion annual tax gap, those efforts could go a long way to reducing annual $1 trillion deficits. Expect the compliance activity to remain high as the government looks to balance its budget.

Tuesday, February 14, 2012

IRS to Business Owners: Did You File Your 1099s?

Business owners will find two new questions on their income tax forms this year:

-"Did you make any payments in 2011 that would require you to file Form(s) 1099?"


- "If `Yes,' did you or will you file all required Forms 1099?"

This is a rather pointed reminder to businesses that they're required to send 1099s to people or companies they've paid money to - particularly independent contractors who were paid more than $600. And to file copies with the IRS. The questions are hard to miss on the tax forms. On Schedule C, the form filed by sole proprietors, they're in the top section, right before you start reporting your income.

Here are some things you need to know about 1099s:


It's mandatory to send 1099s to people who you've made payments to. The forms are specific for the kinds of payments. Form 1099-DIV, for example, must be used if you have a corporation and you've paid dividends to shareholders. The most familiar one for small business owners is 1099-MISC, the form used to pay independent contractors.

Neil Becourtney, a certified public accountant with J.H. Cohn LLP in Roseland, N.J., believes the government has included the new questions on tax forms because it wants to get more companies to comply with the tax law.

"They want taxpayers to announce that I as a corporation or partnership or sole proprietor filing a schedule C had reason to issue 1099 forms," he says.

The penalties can be steep if you don't send the forms, they're late or the information on the forms is incorrect. The penalties start at $30 per 1099. The IRS can waive them if you can show "reasonable cause" for not filing the forms. But, Becourtney says, businesses that say they will file 1099s and then don't may find it harder to avoid penalties.

Becourtney says many businesses wrongly believe that 1099s are intended only for individual recipients. If you hired a law or accounting firm and paid more than $600 in fees, you need to send a 1099.

And if you receive a 1099 from someone you've done work for, you have to report the amount you were paid. Don't shrug it off. The IRS will be looking for that income on your return.


The government has been paying more attention in recent years to the issue of independent contractors, and whether some businesses are trying to avoid Social Security and Medicare taxes by classifying employees as contractors. A business that does that is violating the law.

Becourtney says many employers call part-time workers independent contractors. But the definition of an independent contractor doesn't have to do with hours worked - it's all about how much control a business has over the worker. The IRS puts it this way: "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."

Control is the operative word. If a business can control where the work is done, the hours worked and closely supervises the work, then this is an employee.

The IRS website, www.irs.gov, has more information about independent contractors.


Be aware that you can't download and use the 1099 forms that are on the IRS website. You'll have to order forms from the IRS. The individuals or companies who you've paid must get a copy, and the government gets one too. You can mail paper forms to the IRS or file them electronically. For information about the mechanics of filing 1099s, download "General Instructions for Certain Information Returns." There are also instructions for specific 1099s including 1099-MISC.

The deadline for sending paper 1099s to the IRS is Feb. 28. If you're sending them electronically, the deadline is April 2.

Tuesday, February 7, 2012

What You Need to Know About Your 2011 Tax Return

The Internal Revenue Service has some good news for taxpayers this year -- especially for those who procrastinate.

"This year we don't see a lot of tax changes," said Peggy Riley, an IRS spokeswoman. "But at least one good one is because April 15 falls on a Sunday, and April 16 happens to be Emancipation Day in the District of Columbia and Patriot's Day in Maine and Massachusetts, people have two extra days to file this year."

There are some other potentially beneficial changes.

"There is a new form, the 8949, to report your capital gains and losses," Riley said.

What may be of more interest to taxpayers are things that haven't changed -- but might in coming months.

"We did have that payroll tax deduction extended for two months through January and February. Right now we're seeing more in our paychecks, but that could change come March if they don't extend it," Riley said, referring to Congress. "And there are a bunch of benefits that are set to expire unless they're extended."

Those benefits, still available to qualifying taxpayers filing their 2011 returns, include the American Opportunity Credit for people enrolling in higher education, the Enhanced Child Tax Credit, and the Expanded Earned-Income Tax Credit for people with three or more children.

"There are also some energy credits for people looking to make energy improvements to their homes set to expire after this return period," Riley said in an interview. "And we're promoting a health insurance deduction for small businesses that offer a plan to their employees and help pay for it."

Riley also stressed the value of the Earned Income Tax Credit, calling it the most underused credit. It's available to Americans who earned $49,078 or less last year. The income figure and credit are geared to their filing status and whether they have children.

"That's the biggest one because they think it's not for them, they don't know about it, or they haven't heard about it," she said, "It's a fluid amount of people who qualify for it each year.

"It's a credit for only working people, so you have to have some income, and that's an incentive to get people back into the work force and do better for themselves."

Another lesser-known credit -- the child and dependent care credit -- will be of particular interest to parents.

"It's a credit for parents who are paying someone to watch their children while they're working," Riley explained. "Even summer camps and programs, as long as they're not overnight, can qualify as well."

Once the entire amount paid for child care is determined, parents can be reimbursed a percentage.

Riley wants to further promote the fact that the IRS is available for help with filing and other tax-related issues -- in person, by telephone or online.

The IRS Volunteer Income Tax Assistance program offers free tax help to anyone earning $50,000 or less while its Tax Counseling for the Elderly Program offers free tax help to anyone age 60 or older. More information can be found at www.IRS.gov, and people can call the IRS at 800-906-9887 to find the nearest Volunteer Income Tax Assistance site.

"We've also had the free file program for a number of years," Riley added. "We have a list of 20 companies in partnership with us that offer free electronic filing for people earning $57,000 a year or less."

More information is available online at www.irs.gov/freefile.

Riley also cautioned taxpayers against scams and identity theft schemes that always pop up at this time of year.

"We do see a lot of tax-related scams, especially when it comes to identity theft," she said. "Most of them are made to look official regarding refunds rather than people owing the IRS money because people are more apt to respond to a potential refund. They'll typically ask for [personal identification] numbers or credit card numbers or Social Security numbers, things the IRS doesn't normally ask for."

Anyone with questions or concerns about potential fraud or scams is urged to call 800-908-4490.

Tuesday, January 24, 2012

For Small Businesses and Taxes, It's the Year of the 1099s

Do you owe your mother a gift for her birthday? If yes, do you plan on getting her one? If that reads like an interrogation designed to whip your conscience into shape, it is.

It's also the type of passive-aggressive inquiry that self-employed and small-business owners face this tax season. Only it won't be regarding their mothers. It'll be about paying Uncle Sam.

Congress and the Internal Revenue Service are on a mission to cut down on unreported income.

One initiative involving credit card payments created so much additional work and complaint from the finance industry that the IRS already backed down and postponed it for a year.

But a second -- a two-question grilling at the top of a couple of tax forms -- lives on, likely to entrap a few of you.

New questions on Schedules C and E

If you have profits or losses from a business, a rental, a partnership, an estate or a trust, you file Schedule C or E with your federal 1040 return.

At the top of the 2011 versions, you'll find these new zingers:

"Did you make any payments in 2011 that would require you to file Form(s) 1099?"

"If 'Yes,' did you or will you file all required Forms 1099?"

Form 1099s are information returns. They make the IRS aware that someone else has received income from you.

Generally speaking, if you paid any one person or entity $600 for services last year, tax law requires you to send them and the IRS a 1099-MISC. That MISC is for "miscellaneous" income.

Not everyone does that right now, accountants say. Consider the small building contractor who pays his painter, drywaller and other subcontractors in cash. He might not have filled out a 1099 for each. A self-employed consultant who pays a graphic artist $600 for marketing material must file one, too.

This year, for the first time, the IRS is reminding all these taxpayers of their legal obligation directly on tax forms. They're also getting taxpayers on record as to whether they complied.

See what I mean. It's "Law & Order: Special IRS Agents Unit."

"Taxpayers who don't handle these questions the right way are opening themselves up to penalties," said Troy Thompson, a tax lawyer and certified financial planner in Portland. "Perhaps not fraud, but I do expect vigorous assertion of the penalty for intentionally disregarding the requirements."

That could be up to $250 for each 1099 the IRS didn't get and $250 for each 1099 a contractor didn't get, with no cap on the amount. The IRS also might disallow expenses claimed as deductions if they're not documented as they should be on 1099s, Thompson said.

For a while, it looked as if landlords would have to worry about this, too. But last spring, Congress repealed requirements that rental property expenses be documented on 1099s. Only in limited cases do rental property owners need to issue 1099s, said Benson Goldstein, senior technical manager at the American Institute of CPAs.

The deadline to comply with these requirements is coming up. Most 1099-MISCs must be mailed to contractors by Jan. 31. They must be sent to the IRS by Feb. 28, though you have until March 31 if you file them electronically.

"Putting these kinds of 'gotcha' questions on the return is an increasingly common and I think potentially very effective tool in tax administration," Thompson said.


A second change involves how electronic payments get reported to the IRS. It seems aimed squarely at keeping eBay sellers honest, but affects far more businesses.

A new law requires payment-settlement entities -- the banks, Visas, MasterCards and PayPals of the world -- to report transactions directly to the IRS. PayPal and similar third-party networks need do this only for merchants who bring in $20,000 and conduct 200 transactions a year.

These payments are supposed to be reported on a 1099-K to both the IRS and the merchants. The IRS expected to receive 53.8 million such forms this season.

Payment processors threw such a fuss about complying with this new law that the IRS in November announced it wouldn't penalize anyone this year who failed to comply. But they're still supposed to go out.

Your business might have a new obligation under this law as well. If you issue a 1099-MISC to a vendor or subcontractor, you're supposed to exclude any amounts paid by debit, gift or credit card or PayPal. That's to avoid duplicate reporting to the IRS.

Payments by cash or check, however, still must be included on those 1099s.

That's going to complicate bookkeeping for coffee shops, restaurants and contractors. It could actually lessen paperwork for those who make all vendor payments electronically.

"I might suggest pay credit card all the time," said Goldstein of the CPAs group. "Therefore, I don't have to issue 1099s."

Others predict many businesses will mistakenly include card payments, meaning some income will get reported twice.

"It's going to be a headache," said Greg Rogers, a certified public accountant in Oregon City.

Valerie Calley, owner of Oregon Trail Yarn & Books in Milton-Freewater, says this new requirement won't hamper most eBay business. She downloads PayPal transactions directly into her QuickBooks accounting software and pays taxes on all Internet sales.

"The 1099-K will be just one more piece of paper to give to the tax accountant," Calley said via e-mail. "I don't think Congress will realize the increased revenue they hoped for from the enhanced reporting requirements."

A spokeswoman for Intuit Inc. said its 2012 QuickBooks and TurboTax software will help users identify and exclude electronic payments from their 1099-MISCs. Instead of upgrading, customers with older QuickBook versions can also download a 99-cent app to exclude such payments.

That's good news for business owners who keep good records. Not so for others.

"A lot of small businesses, frankly, don't pay real good attention to their bookkeeping," said Susan High, licensed tax consultant and owner of Clackamas Income Tax & Accounting Inc. in Gladstone. "Especially ones that try to do it themselves."

It's Only Money believes you can do finances and taxes yourself. But if you're overwhelmed or panicked, seek help. Over the next couple of weeks, I'll explain the types of tax preparers you can use and how to best pick one.

Tuesday, January 17, 2012

Watchdog: Growing IRS Workload Hurting Taxpayers

January 11, 2012 (Associated Press) — WASHINGTON - The Internal Revenue Service can't keep up with surging tax cheating and isn't sufficiently collecting revenue or helping confused taxpayers because Congress isn't giving it enough money to do its job, a government watchdog said Wednesday.

To cope with its growing and increasingly complex tasks, the agency is relying more on computer software designed to weed out fraud, Nina E. Olson, the national taxpayer advocate, said in her annual report to lawmakers.

But errors are abundant, creating additional work for the agency when taxpayers dispute its findings, the report said. The agency's use of computer systems sometimes ends up eroding taxpayers' rights, and people are having a harder time getting through to the IRS by telephone or letter, she said.

"The overriding challenge facing the IRS is that its workload has grown significantly in recent years while its funding is being cut," said Olson, an independent watchdog within the IRS. "This is causing the IRS to resort to shortcuts that undermine fundamental taxpayer rights and harm taxpayers - and at the same time reduces the IRS' ability to deliver on its core mission of raising revenue."

IRS spokeswoman Michelle Eldridge said to combat burgeoning cases of fraud, the IRS uses congressionally approved compliance programs that are constantly audited to make sure people's rights are protected.

"While fewer dollars in a tight budget environment impacts elements of taxpayer service, it does nothing to erode our protection of taxpayers," she said.

By pointing her finger at the IRS budget, Olson was highlighting a politically sensitive issue. Especially in times of huge federal deficits, many lawmakers have shown little interest in being generous to the widely unpopular agency, which processes 141 million individual tax returns annually, including almost 120 million requests for refunds.

Congress cut the IRS budget to $11.8 billion this year. That is $300 million less than last year and $1.5 billion below the request by President Barack Obama, who argued that boosting agency spending would fatten tax collections and improve service.

Those arguments did little to persuade lawmakers.

"Like families across the country, the IRS will have to do more with less," Rep. Jo Ann Emerson, R-Mo., who heads the House Appropriations subcommittee that controls the agency's budget, said last fall.

Olson's report came days after the IRS estimated that people and companies underpaid their taxes by a huge $385 billion last year after audits and other enforcement efforts, compared with around $2.3 trillion the agency collected. Those underpayments come as lawmakers hunt ways to pare federal deficits exceeding $1 trillion yearly.

"Yet obtaining a little extra money to bring in a lot of extra money remains an intractable challenge for the IRS, and that is unfortunate," the report said.

Underscoring the IRS' volume of work, the report said the agency contacted taxpayers 15 million times in 2010 to change their claimed tax liability. Only 1 in 10 of those contacts was considered an audit, meaning most were denied the additional rights audits allow, including the ability to go to tax court.

The agency's increased reliance on computers means it is having less personal contact with taxpayers. The IRS is increasingly using "practices and procedures that harm taxpayers by acting on assumptions of noncompliance arrived at by automated processes that do not solicit, encourage or allow taxpayer response," the report said.

It said the number of returns seeking refunds that agency computers set aside for screening for possible fraud grew by 72 percent, to 1.1 million, from 2010 to 2011.

The report blamed growing numbers of people who submit multiple false returns via electronic filing. The growth of refundable tax credits for purchases of first homes, college costs and other expenses is also encouraging bogus claims, since refundable credits can produce cash payments to people owing no taxes.

Olson's report said the IRS handled more than 226,000 cases claiming identity fraud in 2011, a 20 percent increase over 2010. Thieves often request refunds by using the Social Security number of a person they falsely claim as a relative, frequently early in the filing season before the actual taxpayer submits his or her return.

"You want to make sure you're not abusing the taxpayers by letting dollars go out the door," Olson said in an interview. Otherwise, "taxpayers are going to get disgusted" and lose faith in the tax system.

In one measure of errors, Olson's bureau received 21,000 complaints from taxpayers last year after the IRS blocked requested refunds because it suspected fraud. Three in four of them eventually qualified for the refunds, which averaged $5,600 and typically took six months to reach taxpayers.

In addition, the IRS corrected 10.6 million "mathematical errors" in taxpayers' returns in 2010, more than double the 4 million it corrected in 2005, the report said. But the IRS itself made mistakes - out of 300,000 returns on which it disallowed exemptions for dependent children, it had to restore the exemption just over half the time.

The report said that at the end of last year, it took the agency more than six weeks to answer nearly half of taxpayers' letters and faxes dealing with adjustments to their returns. The agency does not accept emails from taxpayers, Olson said.

And between 2004 and last year, the portion of taxpayers' phone calls the IRS answered fell from 87 percent to 70 percent.

"Few government agencies or businesses would be satisfied if their customer service departments were unable to answer three out of every 10 calls," the report said.

Highlighting tax code complexity, 4,428 changes have been made to the 3.8 million-word code over the past decade, the report said, including an estimated 579 changes in 2010.

Tuesday, December 20, 2011

Top Four End-of-Year Financial Planning Tasks

Between turkey and holiday cookies, don't forget the most important type of planning you should do this year, financial planning. M&I, a part of BMO Financial Group, offers these four aspects of your finances everyone should review before 2012 arrives.

Budgets: Review your monthly budget and track your spending. Keeping track of where your money is being spent will highlight unnecessary expenses. Begin saving today. A savings account can help when life throws an unexpected curve ball. Ideally, build an emergency fund that could pay your necessary expenses for six months.

Creating budgets with your children is also a great way to teach kids about money and the difference between a need and a want. Our Helpful Steps for Parents tool provides parents with tips, games, and strategies to help teach children financial literacy. Visit www.bmoharris.com/parents to learn more.

"The Helpful Steps program starts with kids as young as five years old," said Jim Sathre, senior vice president, retail banking for M&I. "Giving kids a financial education will prepare them for every stage of life, from saving for college to buying a house."

Retirement: Examine how much you've been putting in your retirement account this year. If possible, plan to contribute the maximum allowable amount to your 401(K) and take advantage of your workplace retirement plan to gain matching contributions. If your workplace does not have a matching program consider a Roth IRA.

College: College planning is essential for every family whether you are just starting out or are planning to support a grandchild's education. If you have not started preparing for future college expenses, start now. College savings plans can offer considerable tax benefits. Each state offers residents a 529 college savings plan that provides tax benefits or other perks to help parents and students prepare for college bills.

Investments: Invest wisely. Investigate investment options to determine which is best to meet your financial needs. A few options include money market accounts, CDs and government bonds, and IRAs. Solid investments may reap dividends in the future.

We all know how important it is to save money and prepare for the future and reviewing your budget and investments will ensure you're meeting your financial goals.

Tuesday, December 13, 2011

Top 12 Financial Planning Strategies for 2012

December 6, 2011 (Business Wire) — The Financial Planning Association (FPA) of San Francisco announced today the top 12 financial planning strategies for individuals to consider for 2012.

Ranging from developing a comprehensive financial plan, putting in place a disciplined savings program to diversifying portfolios and benefitting from the latest tax changes, these comprehensive tips and advice will help investors start 2012 on the right financial footing.

#1. Get Started Today

If you spent much of 2011 in denial or ignoring what you know you needed to do financially, don't be embarrassed; you had plenty of company. The best way to come to grips with your financial future is to review your financial plan. If you don't already have one, make a plan. You'll want to analyze your asset base, your earning potential, and your spending. Most importantly, you'll want to review your goals. Are they still attainable, or even reasonable? You can do it yourself, but a professional financial planner has the knowledge and the tools to calculate what it will take to reach your goals while helping you manage your finances along the way to help you get there.

#2. Spend Less. Save More.

The best way to provide -- or recoup -- the money you will need in the future is to save more now. Here's a good way to start -- pay yourself first through payroll deductions into your 401(k) or savings account. Another place to look is at your credit cards. Instead of paying high credit card rates, you'll be earning market-beating 9, 12, 18, or an even higher percent. That's your return on every dollar you don't have to pay to a credit card company.

#3. Got lemons? Make Lemonade.

There is a positive side to stock market losses. Take advantage of the down market this year to harvest tax losses. Any losses not used to offset capital gains can reduce ordinary income by up to $3K in 2011, and the excess is carried forward into future tax years.

#4. Keep on Contributing to Your 401k

Continue putting away as much as possible into your employer retirement plan. If the contributions are on autopilot, you're less likely to come to a sudden stop when current events are discouraging. Also, dollars are invested throughout the year, so in a market that is up one month and down the next, you won't buy all your shares at high points and you'll get more shares at low points.

#5. Keep an Eye on a ReFi

With interest rates at all-time lows, it's a good time to explore if refinancing makes sense. You may find it preferable to refinance from a 30- year loan to a 15-year loan, as some institutions are offering 15-year loans at less than 4%. Run the numbers. You may find that the payment on a new 15-year mortgage is similar to an existing 30-year mortgage and would significantly reduce the amount of interest paid over the life of the loan.

#6. Assess a Reassessment

With the continuing decline in home values in many locations, homeowners should consider applying for a reassessment of their home value for property tax purposes. This is a relatively easy process that might save significant money, especially for those in expensive areas. The county assessor's office can provide you with the forms and process for requesting a reassessment.

#7. Update Your Estate Plan

Take a fresh look at your estate planning documents. The annual gift limit remains at $13,000 per donor per person in 2012, but the lifetime exemption of $5,000,000 in 2011 has been adjusted for inflation and will be $5,120,000 in 2012.Your financial planner and your estate attorney will know what these changes mean for your specific situation.

#8. Give a Gift or Make a Loan

Want to help out a family member who may be in dire straights, but don't feel comfortable making an outright gift? Loans to family members must use government-approved rates, or they will be taxed as gifts. It's called the Applicable Federal Rate, or AFR, and our low interest rate environment could make 2012 an excellent time to make loans. The current long-term AFR for loans more than nine years is 2.80% (compounded annually), and the short-term AFR for loans less than three years is only 0.2%

#9. Resolve to Review Beneficiaries

Use the start of the New Year to review all beneficiary statements for 401k plans, IRAs, and life insurance policies. Remember that retirement account assets pass by beneficiary statement and not by will; the same is true for life insurance policies. Every financial planner has stories of clients who divorce and never revise their beneficiary statements; the client dies and a life insurance policy or 401k is paid to the ex-spouse, leaving a current spouse or children with nothing.

#10. Keep Up with Contribution Limits

Take advantage of 2012 increases in retirement account contributions. The maximum 401k, 403b, 457 contributions increase to $17,000. Catch-up contribution for the over-50 set is an additional $5,500

#11. Keep Your Cool

Listening to the financial news wasn't easy in 2011 and we may face the same cacophony of doomsayers in 2012. Selling stocks when prices are down is not a successful long-term investment strategy. And remember -- when media headlines proclaim, "investors are dumping stocks," someone else is buying them.

#12. See a Financial Planner

Financial planners can help you navigate your way through these perilous economic times. No one knows what the future will bring, but a good planner can provide the kind of experience and objectivity that can bring clarity to difficult financial decisions.

If you have a financial planner, and you haven't updated your plan in light of recent economic realities, it makes sense to check if you're still on track, or if there are course-corrections you could make to improve the situation.