Advice
As the year comes to a close, there are some important deadlines that you shouldn’t ignore. These deadlines affect your taxes, savings, and, perhaps, your financial future. Here’s a simple guide to help you stay on track before this year’s clock runs out.
December 31: Retirement Contributions
Make sure to contribute to your 401(k) by the end of the year to manage your taxable income and potentially stash more money for retirement.
December 31: Charitable Donations
Are you interested in charitable giving? You might want to get it out of the way before the end of the year, because you could use your charitable donations at tax time to help lower your tax bill.
December 31: Use Up Your Flexible Spending Account
If you have a Flexible Spending Account (FSA)1 for healthcare or childcare expenses, be sure to see how much money you have banked. Most of these accounts are “use it or lose it” – leftover money in your FSA might go away on December 31st, so spend it now! Keep in mind that some accounts have “safe harbor” provisions that allow you to use these funds into the new year. Talk to your FSA administrator to see what options you have.
December 31: Review Your Investments
It’s a good idea to review your investments periodically throughout the year. But taking a look on December 31st is even more important. If you make money in your non-retirement investments, you could end up with a tax bill. If you lose money, you could lock in these losses to lower your tax bill. Ask your accountant if there are any investment moves you should make during the last part of the year.
December 31: Review Your Tax Withholdings
Look how much tax was withheld from your paycheck over the last year. If your withholdings are too high, this might be an opportune time to adjust them and help avoid a big tax bill or large refund when you file your taxes.
January 15: Estimated Tax Payments
If you’re self-employed or earn money that doesn’t require you to withhold taxes – via disability, unemployment or investment income – you must make quarterly estimated tax payments. The final installment for this year is Jan 15th, so stick a note on the calendar to avoid a late-payment penalty.
April 15: IRA Contributions
Most year-end deadlines match the calendar year. But IRAs are one exception. Both traditional and Roth IRA contributions for this year may be made as late as April 15th. That extra saving period also means a tax break. By waiting you might assess your tax liability and figure out whether it makes more financial sense to contribute to a traditional IRA or a Roth IRA2. For more information on year-end planning, contact Bill Rohwer by calling (260) 969-5982 or send an email to [email protected].
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Footnotes
1 Flexible Spending Account
https://www.healthcare.gov/glossary/flexible-spending-account-fsa/
2 IRA Contributions
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits