You can, and sometimes should, wait until the last minute to take advantage of some tax breaks, for example, boosting itemized deductions through year-end payments. However, some tax breaks must be set up early and their benefits are proportionate to the amount of time remaining. Tax planning is complex. Fortunately, some planning can be reduced to fairly basic steps. Keep in mind that you should customize your tax strategy to maximize savings and avoid costly mistakes.   Here are 10 important considerations to start saving you money in 2006. #1: Tune up your recordkeeping. Taxes will always be higher if you're not keeping good records. On an IRS audit (The IRS is again stressing enforcement and audit rates are rising rapidly) the agent's mantra is "prove it." If you don't have the proper records, you don't get the deduction or credit.  This means knowing what tax items need recordkeeping and then setting up the right systems...and using them. As a baseline consideration, business taxpayers should be in the habit of keeping receipts, accurate inventories and properly managed expense reimbursement plans. Individual taxpayers should keep careful records on medical expenses, charitable contributions, and employee-related expenses. #2: Defer income from the start. At the beginning of the year you should look into maximizing your tax-deferred savings. This can be done through retirement plans, educational plans and health savings accounts. The earlier you contribute to these accounts, the sooner they are earning tax-free interest and other investment returns for you. #3: Take advantage of lower rates on dividends and capital gains. Most income is taxed at regular income rates. Dividends and capital gains, however, are taxed at a maximum rate of 15 percent. Take a look at your investment portfolio to make certain that it is "tax aware." Short-term gains should be avoided (unless the alternative is a long-term loss by holding an investment past its time). Tax-exempt income should be considered, along with its relationship to your state income tax liability. Losses should be managed carefully to maximize loss offsets. #4: Anticipate major life changes.  Getting married, divorced, having children, changing jobs, moving? Starting a new business, expanding? Most major events in your life have tax implications. The sooner you anticipate the tax side of these changes, the easier it will be for you to focus on the events themselves, knowing that you've got tax minimization covered. #5: Learn from your mistakes.  Get your 2005 return done as early, if possible, so you can see where you paid too much tax. #6: Consider a Roth 401(k). Starting in 2006, employer-sponsored 401(k) plan may be converted to a Roth 401(k). The benefits of owning a Roth 401(k) are similar to having a Roth IRA, where contributions to the plan are pre-taxed but distributions are tax-free. You can only elect a Roth 401(k) if your employer offers it as an option. #7: Plan for new energy credits.  Three significant energy tax credits are new for 2006, thanks to the Energy Tax Act of 2005. First, there's a credit of up to $500 total over the 2006 and 2007 tax years for homeowners who install nonbusiness energy-efficiency property, such as exterior doors and windows, insulation, heat pumps, central A/C and water heaters. Second, there's a residential alternative energy credit. Third, there's a new tax credit for buying a hybrid vehicle. #8: Adjust for "qualifying child" status. One definition of a qualifying child now covers an array of tax benefits, including the dependency exemption; head of household filing status; the earned income tax credit; the child tax credit; and the credit for child and dependent care expenses. Every parent and caregiver should review the new rules to maximize the associated tax benefits. #9: Review changes made by the 2005 hurricane disaster relief acts.  Congress has passed tax relief for victims of Hurricanes Katrina, Rita and Wilma. There are special deductions, credits and other incentives for businesses and individuals. Investors in the Gulf Coast also are eligible for some tax incentives. Congress also made some technical corrections to past tax incentives, especially the new manufacturing deduction and nonqualified deferred compensation. #10: Keep your eye on Congress. 2005 ended without Congress extending some very important tax breaks. For individuals, these include alternative minimum tax (AMT) relief, the state sales tax itemized deduction, the teachers' deduction for classroom supplies, and the higher education expense deduction. For businesses, the enhanced section 179 expensing deduction ends in 2006 if it isn't extended.  Many lawmakers also want to extend the lower tax rates on dividends and capital gains but these are very controversial with the federal budget deficit at an all-time high.  Some of these tax breaks are expected to pass in February and be retroactive to January 1, 2006. Be ready to act once Congress makes up its mind. If you need assistance in taking any one of the 10 steps to maximize your 2006 tax savings, please do not hesitate to call our offices.