DeYoe Wealth Management is advising its clients to start preparing immediately for the end of the Bush tax cuts.          

Jonathan DeYoe, who runs the Caliornia-based firm, says planning for the end of the Bush-era cuts is as important as filing the 2011 return by 17 April.

"Once someone receives a benefit, it is very hard to take it away," said DeYoe. "Unfortunately, given the state of our federal budgets, I think it's highly unlikely we'll see a continuation of the Bush tax cuts after the end of this year. Spending must come down and tax rates must go up."

Among the considerations the firm is discussing with its clients is accelerating income into 2012, whether it’s employment income or, for small business owners, bringing income forward and deferring deductions.

Furthermore, to ensure clients are not short of cash at the tax deadline next year, DeYoe recommends reviewing federal and state withholding exemptions now.

“Should tax rates spike, it will probably be a lot easier to pay a little bit of that tax every month this year rather than having to come up with a large lump sum at tax time in 2013,” the firm advises.

Tax increases will also hit total returns, so financial planners and clients should be discussing overall asset allocations and reducing the “expected” returns built into financial plans, said DeYoe.

Other areas of discussion with clients include where they have large gains in current portfolios or stock options they’ve been waiting to exercise, as 2012 “might be a better year to recognize those gains,” said DeYoe.

Meanwhile, as the estate and gift tax exemption is slated to drop from $5 million to $1 million in 2013, “anyone with a large estate should talk to a CPA, attorney and financial advisor about taking advantage of the gifting portion of this benefit before it disappears,” he added.