So what should you do?
Should you accelerate expenses or risk carrying them into next year? Should you accelerate income or defer it? Will rates rise next year? Will they remain the same?
There are so many questions and possibilities that this year, some planning techniques will be nothing more than a huge gamble. You may have better odds playing the lottery than guessing the end result.
Instead, focus on the following safe strategies that are sure to be your best bets no matter what the end of the year may bring.
Planning for your investment dollar
If you have incurred losses on investment holdings, carefully examine your portfolio to determine whether it would be beneficial to realize these losses before the end of 2012. Question whether realizing these losses will generate loss carry-overs to be utilized in later years or whether these losses will create a substantial reduction in income in the current year.
If the realized losses will not create a substantial reduction of current income or a loss carry-over, it may be wise to consider waiting until 2013 or subsequent years to realize the loss.
James R. Washington III, a certified public accountant and tax attorney at Ajubita, Leftwich & Salzer LLC in New Orleans, says capital gains should be given careful consideration.
Washington says many tax advisers are urging clients to sell lucrative investments during 2012 in order to avoid the 3.8 percent Medicare tax scheduled to be implemented in 2013 and to avoid a possible hike in the capital gains rates.
"However, advisers and investors should be careful," Washington says. "This advice may work for some taxpayers, but not all."
For starters, the Medicare tax will only affect high-income individuals, he says.
"Also, if capital gain rates do not rise, taxpayers who hurriedly dump investments may not gain any benefit, may squander opportunities to defer tax and may lose money on reinvestment expenses," Washington says.