Go the Whole Nine Yards

| December 18, 2014

Mike's Blog

9 smart year-end planning moves

The end of the year is fast approaching and now is the perfect time to review our checklist of items you might want to consider as you get set to enter 2015.

And remember, when it comes to tax matters, it’s always a good idea to check with your tax advisor.

  1. Tax loss deadline.You have until December 31, 2014 to harvest any tax losses and/or offset any capital gains. But be careful. There are distinctions between short- and long-term capital gains, and you must be aware of wash-sale rules.

  2. Begin gathering the tax documents you’ll need to complete your tax returns.W-2s and 1099s won’t show up until next year, but everything from receipts for donations to business expenses will be needed if you are to minimize this year’s tax bite.

  3. Take stock of changes in your life and review insurance and beneficiaries.It’s a good idea to update beneficiaries if the need has arisen. Circumstances in your life may have changed in the last year. Documents must be updated or you may deny an intended beneficiary their rightful inheritance.

  4. Use it or lose it.As the year draws to a close, many people with a flexible spending account (FSA) for medical expenses must spend any savings or forfeit them.

  5. Contribute to a Roth IRA.A Roth gives you the potential to earn tax-free growth and allows for federal-tax-free withdrawals if certain requirements are met. There are income limits, but if you qualify, you may contribute $5,500 or $6,500 if you are 50 or older.

    You may also be eligible to contribute to a traditional IRA (which are tax-deferred, not tax- free), and contributions may be fully or partially deductible, depending on your circumstances. The same contribution limit that applies to a Roth IRA also applies to traditional IRAs. Total contributions for both accounts cannot exceed the prescribed limit.

    Although we won’t hit the 2014 deadline until April 15, 2015, start thinking about funding your account if your income permits. The sooner the account is funded, the sooner you begin taking advantage of tax-deferred or tax-free growth.

  6. Consider converting a traditional IRA to a Roth IRA.There are things to consider, including current and future tax rates, but if the situation is right, it can be very advantageous to convert to a Roth IRA.

  7. Do your charitable giving.Whether it is cash, stocks, or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income.

    Did you know that you may qualify for what’s called a “qualified charitable distribution (QCD)?” A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 701⁄2 or over that is paid directly from the IRA to a qualified charity.

    But there’s one small rub. QCDs are expected to be renewed by Congress, but technically, they expired December 31, 2013. Assuming they are renewed with no changes, an IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year.

  8. Speaking of IRAs, is it time to take a required minimum distribution?RMDs are minimum amounts that retirement plan account owners must withdraw annually starting with the year they reach age 70 1⁄2 or, if later, the year in which they retire.

    However, the first payment can be delayed until April 1 of the year following the year in which a person turns 701⁄2. For all subsequent years--including the year the initial RMD is paid out by April 1--account owners must take the RMD by December 31 of the year.

    The RMD rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

    Don’t miss the deadline or you could be subject to steep penalties! If an account owner fails to withdraw an RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%.

  9. Review your income or portfolio strategy.If you are reaching a milestone in your life such as retirement or experiencing a change in your circumstances, now may be just the time to evaluate your approach.

As you can see there are several things you can do to help yourself tax wise as we wrap up 2014. So why not go the whole nine yards and give yourself a year-end tax tune up?

Questions? Comments? Just Ask Mike!

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.