Think about it. If you're an incumbent politician, the last thing you want is a large group of voters coming to the polls right after mailing their tax returns. After all, it's at that very moment that taxpayers/voters are most steamed about the stranglehold government has on their wealth.

No, if you're one of those entrenched, corrupt, power-hungry fat cats, you want tax season about as far away from decision time as possible. If Election Day were New York, you'd want tax season to be Australia. That just about describes the current situation. April 15 is about six and a half months before you vote, and five and a half months after. Election Day and tax day are on opposite sides of the calendar. Coincidence?

First, taxpayers either do insufficient year-end planning, or don't do it at all.

Which takes us to mistake number two: Even when they do engage in year-end tax planning, taxpayers wait too darn long to start.

If taxpayers truly wish to protect their wealth, taxes should be at the forefront of their minds on Election Day. By December, it may be too late to take the steps necessary to reduce your taxes.

Adjust your W-4 and increase withholdings for the last few pay periods of the year. But make sure you act now. It could take a couple of weeks for withholding changes to kick in. So you want to have at least the two pay periods in December (assuming you're paid biweekly) to alter the amounts.

This type of end-of-year adjustment is not as easy if you pay only estimated payments and no withholdings. With quarterly estimated payments you pay as you earn. If you earned money in the first quarter of the year, but don't pay taxes on that amount until a later quarter, you may very well owe a penalty — even if you've paid all you need to through the fourth quarter.

Two cautions, though, if you're thinking of taking the reduction route. First, you may not want to reduce state tax withholding, since if you itemize you can generally deduct your state tax payments on your federal return. Second, be very careful with your calculations. You don't want to end up getting it wrong and withholding too little.

Now, how do you figure whether your withholding is too much, too little, or Goldilocks perfect?

First, take a look at your latest paycheck. Extrapolate the withholdings to the end of the year. Then figure out the "safe harbor" you wish to use.

You are subject to a penalty if you underpay your taxes. But the penalty will not apply if you pay enough to meet one of the following safe harbor tests.

The first is the "100%-of-prior-year's-tax-liability" test. If you pay the full amount of last year's tax liability by December 31 (or January 15 if you pay estimated taxes), you're safe.

This safe harbor has the virtue of certainty and simplicity. To figure out the amount, just look at line 56 of your 1999 Form 1040. That's the minimum you need to pay by the end of this year.

But politicians don't want to make this too easy for you. If you make "too much" money, the safe harbor is higher than 100%. For instance, if your 1999 adjusted gross income (line 33 of your return) was more than US$150,000, then your safe harbor amount is equal to 106% of your 1999 tax. That's right. You have to pay in more than you paid last year.

If you received a raise in 2000, earned substantially more dividends and interest than last year, or sold a lot of stocks for a gain, this safe harbor is very useful. Your income can be much higher than it was last year, but you'll still be able to delay paying a hefty portion of your taxes until next year.

Let's look at an example. Suppose you made US$37,000 last year and your tax liability was US$4,400. In June, you got a new job paying you twice as much. You expect a tax liability next year of, say, US$6,000.

You only have to pay US$4,400 in withholding for 1999. You can pay the remaining US$1,600 on April 15.

That's a pretty big check to write, you say? Not considering the fact that it's you earning interest on that money in the meantime, instead of the IRS.

But what if your income this year has gone down considerably from last year? Let's say in 1999 you had a lot more capital gains than you anticipate from this year's generally depressing stock market (unless you've been taking Taipan's advice). Or maybe you got fired in August and found a lower-paying job in October.

In that case, you may want to look at the second safe harbor: paying at least 90% of this year's tax liability.

The problem with this one is that it provides less certainty than safe harbor number one. But that shouldn't be an insurmountable problem. Sit down with your 1999 tax return and estimate how each item will change, if at all, for year 2000. Then estimate your tax liability and multiply by 90%.

Oh, by the way, to figure this out you need the year 2000 tax rates. After all, the tax rates change every year. For current rates, obtain Rev. Roc. 99-42, 1999-46 I.R.B. 568, at www.irs.gov.

Once you have these rates, you can figure what you have to pay in by the end of the year.

There's a third safe harbor that can get you out of hot water if you miscalculate. Pay in just enough so your unpaid tax will be less than US$1,000 come April 15.

This safe harbor can be very useful if you're careful with your estimates. Suppose you had a tax liability of US$4,500 in 1999. You expect the same liability for 2000. The 100% safe harbor means you're paying in exactly that amount. The 90% loophole puts you at US$4,050. But the US$1,000 safe harbor would let you pay in only US$3,500 — just 78% of last year's — and this year's — liabilities!

Two warnings, though. First, to qualify for this safe harbor, you can only count withholdings, not estimated taxes.

Second, if you miscalculate and your unpaid tax is just a little over US$1,000, you'll owe a penalty. And the penalty will be on the full amount you underpaid, not just the amount in excess of US$1,000.

Enough about withholdings. Here are some other end-of-year strategies:

2. Cut the amount of investment gains you ship off to the politicians. Too many investors simply ignore their tax situation until it's too late to do anything about it. Of course, you shouldn't let taxes override all considerations. But you should pay close attention to your after-tax investment results.

Consider tax implications with every move you make. If you haven't up to this point, don't worry about it. Just start now. In any event, sit down and determine the tax results of any 2000 investment sales.

To accomplish this, start by determining the basis of the investments that you sold. This sounds absurdly simple. But there are at least two potential complications.

First, after a huge market correction, some investors may assume that a stock or fund they're selling way off of its recent high is not priced much higher than it was when they first bought it months (or even years) before. In other words, recent market volatility may lead you to underestimate your taxable gains. Keep your eye on the ball — that is, the original cost of the stock.

Second, if you sold something you bought a long time ago, you may have a hard time tracking down the cost basis. This is why it's important to keep good records, and to hold on to the documentation you receive whenever you buy a stock.

If you own mutual funds, contact the fund administrator to get an estimate of the distributions. This year, many mutual funds are expecting to pass on larger-than-usual tax bills to their shareholders.

Once you have determined your taxable gains, decide whether you should offset those gains with any losses. If you own stocks that are down from their cost basis, consider selling them before year's end to offset gains. Also remember that you can deduct losses up to US$3,000 in excess of gains.

Keep in mind that you can choose which shares to sell. If you're selling off a portion of your holdings in a stock or fund, you will generally want to sell the stock with the highest basis, to give yourself a tax loss or a lower tax gain this year. This move defers taxes to future years (when you will presumably sell the lower based shares). Because of the time value of money, taxes deferred mean cash in your pocket.

What if you have a loss in a stock, but want to hold onto it for investment reasons? Well, the wash sale rules pose a problem. Under these rules, you can't take a loss on any stock that you sell and buy back within thirty days, or that you bought less than thirty days before the sale date. However, there are ways around this. You can sell the stock and have your retirement plan pick it up. Or you can buy a similar stock — one in the same industry, for example.

3. Maximize your tax-deferred retirement plans. One of the few tax shelters politicians have provided to the ordinary taxpayer is the tax-deferred retirement plan. If you have a 401(k) plan at work, or are eligible to make IRA contributions, use these options to the utmost. If your cash flow allows it, dump your money into these things until the rules say stop.

The beauty of these plans is that you're not taxed on any interest or gains your money is making for you while it's inside the plan. You're only taxed on it when the money is distributed to you, presumably after you've retired. Plus, contributions to a 401(k) plan and a traditional IRA aren't included in your taxable adjusted gross income. Contributions to a Roth IRA are not excluded from income, but you're not taxed on amounts eventually distributed to you from the plan.

Unfortunately, you can contribute no more than US$2,000 a year to an IRA. There are also limitations on the percentage of your salary that you can contribute to a 401(k) plan.

For your IRA, you have until April 15 to make the contribution, but there's no reason to wait until then. The longer your funds are in these accounts, the more benefit you get from the tax deferral.

4. You're not a Scrooge just because you carefully plan your charitable contributions.

"There are two classes of charitable people; one, the people who did a little and make a great deal of noise; the other, the people who did a great deal and make no noise at all."
— Charles Dickens, Bleak House

It seems too many people like to go public with their wonderful charitable predilections. And they like to twist the arms of others to donate to particular organizations.

That's not the way it should work. Charity should be a personal undertaking. Your decisions should be made in the quiet of your own home.

So the only proper answer to people who solicit donations from you is: Send me something in writing. Cold-hearted? Not really. How much you contribute is your decision. And you should make those decisions free from pressure, free from societal coaxing and free from guilt.

Heck, if nothing else, careful charity planning will protect you from con men who try to use guilt to trick you out of your money.

Your charitable contributions are nobody's business. Uh... nobody, that is, except the IRS.

It just so happens that if you itemize them on your return, you can deduct these contributions. Even if you are making them for reasons that have nothing to do with taxes, you should determine your total contributions early enough so that you can use them in your tax calculations.

If you're going to make charitable contributions, consider donating appreciated stock. If you do, you won't pay taxes on the gains, but you still get to deduct the full fair market value of the stock. That's a good deal in anybody's book.

You can contribute other items as well, such as your car. But be aware that the IRS is cracking down on people who donate cars that are essentially worthless, but take sizable deductions anyway. You can only deduct the fair market value of whatever property you donate.

Make sure any charity you deal with is reputable and tax-exempt. That's the only way you'll be entitled to a deduction.

5. Choose the right year for those deductions. Generally speaking, a deduction today is worth more than a deduction next year. So, for example, you may wish to make an early mortgage payment or two before the end of the year to get the extra interest deduction.

In addition, there are certain "floors" that prevent you from taking deductions. You can beat these floors by "bunching" as many deductions as you can into one year. If this situation applies to you, you may actually benefit from deferring some deductions.

For example, you can generally deduct medical expenses only for amounts in excess of 7 1/2 % of your adjusted gross income. If you're expecting major medical expenses next year — perhaps because of a planned operation — put off other medical costs until the same year (but only if it won't adversely affect your health, of course).

Similarly, so-called miscellaneous expenses are deductible only to the extent they exceed 2% of your adjusted gross income. These include investment-related expenses (such as relevant periodical subscriptions), tax preparation costs, professional and business dues, job search fees, certain education costs, etc.

6. Reread the State Tax Report. This is admittedly an unconscionable plug for our groundbreaking book, which ranks the various states by tax burden (you can order it by calling toll-free, 800-433-1528 or by clicking here). Still...

The point is, don't forget state taxes at this time of year. Review your local tax rules to make sure you're taking full advantage of any tax breaks peculiar to your state.

In addition, if you itemize deductions, and thus can deduct state income taxes, you may want to pay more state taxes this year — even if you've paid enough to meet your state's safe harbor rules. As discussed above, it's generally better to get the deduction this year than next. So figure out how much state income tax you're going to owe and consider paying the difference before the end of the year.

7. Give away your money! To the uninitiated, that may sound like strange advice from a wealth protection specialist. But if you have more than enough income for yourself, it may be a good idea to make annual gifts to your children prior to year's end.

You're entitled to make a gift to anyone of US$10,000 each year, with no estate or gift tax implications. This is a great way to transfer wealth to the next generation and minimize estate taxes.

If it's your parents that have all the money, try to get them to make these gifts.

True, giving away your money is not usually a great planning idea. But it's far better to give to your children than to the government. Although those professional politicians may feel differently...

If you want to improve your Quality of Life, read on...