Before the ball drops: Don't drop the ball!

We only have a few days left in 2016. If you wait until next year, you can miss out on valuable opportunities to lower your tax bill.

Why scramble when you can plan ahead?

It all starts with having a clear picture of your income and expenses for the calendar year. Transcripts from the IRS are typically not available until well into the next year, but you can review bank statements, pay stubs, and year-to-date activity logs from your books, financial institutions and investments/businesses. This will give you information to estimate your tax liability.

Tax laws are subject to change by Congress, therefore always verify latest regulations before taking any action. Below are some methods to reduce your tax liability and avoid late payment penalties.

Withhold tax due by 12/31: You are required to pay tax as you earn income.

For example, if you make money equally throughout the year, and your total tax liability for the year is $10,000, you should make four "estimated" payments every quarter in the amount of $2,500 each.

If you wait until December 31, 2016 or later to pay what you owe, you will likely incur late payment penalties, which are generally 0.5 percent per month of your unpaid taxes. The longer you wait, the larger the penalty.

Even if you failed to pay estimates throughout the year, you can avoid penalties by withholding the full amount due before the end of the calendar year.

Pay State/local Tax before 12/31: Federal taxes are not deductible on your federal return.

However, state and local taxes (such as property taxes) in many cases are deductible! Pay off these amounts before the end of the year to take advantage of deductions.

NOTE: If you are subject to Alternative Minimum Tax (AMT), no property and state tax deductions are allowed when income is above certain AGI thresholds.

Depreciation: There are numerous options for depreciating property and there are firms that specialize in this field, known as "cost-segregation." You can only depreciate an item once, but you can accelerate depreciation on certain items in order to keep more money in your pocket today.

C Corps: If you have a C-Corp, make sure to"bonus out"profits in order to avoid double taxation. Refer to our previous article "What Kind of Corporation Should I Create? " for more details.

S Corps: Pay officer(s) reasonable salary before year end. You can use this opportunity to withhold tax and avoid late payment penalties (see above).

When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders. (From IRS website) This has become a hot button issue with IRS recently, so be sure to get this done before 12/31.

Contribute to Individual Retirement Account (IRA)

• Minimum contribution: $1,000 to open an IRA account, with subsequent minimum contribution of $100 per transaction

• Maximum contribution: $5,500 per year ($6,500 if you are age 50 or over) per spouse

• Self employed can open retirement plans by 12/31/2016 (or even 4/17/2017 under some type of plans) and deduct larger retirement plan contributions as long as they are funded by extension due date of 10/16/21017.

These contributions are tax deferred, meaning that you will not be taxed until you take the money out many years down the road. Contributing to an IRA can save you around $1,500 per year.

Defer income and capital gains: Deferring income may be an option if you have your own business.

This is typically is not an option for employees, but check with a tax professional to weigh your options.

Deduct business expenses and capital losses: Similar to deferring income, prepaying certain expenses (like accounting fees) can help you lower your tax bill. Selling off losing investments can offset capital gains.

Charitable contributions: Maximize the value of your donations to non-profits by giving before the year ends. Make sure to get a receipt! Aside from writing a check, you can also give non-cash donations, such as clothing, cars and furniture reported at fair market value of your donation.

Medical expenses: Medical deductions are limited, but there are ways to utilize them in order to lower your tax bill. Again, consult with a tax professional.