Make Sure Your Year-End Financial Checklist Makes Sense

By |2015-05-21T02:31:39+00:00December 11th, 2014|Taxes|

BY Chuck Bartman

The year end is upon us, it is time to make any changes that can help you plan for maximizing your tax year. It could be time to address good recordkeeping and better tax liability planning. Here is a list of topics that will help you re-evaluate your personal situation.

Investments. Review your approach to investing and make sure it still matches up with your goals.  As the years go by, our situation can change.  Have you s3elected the correct blend of safety and risk?  As we get older we all will move to safety and security is it time for you to consider safety and security as your primary investment option?   

Retirement planning strategy. How have your objectives changed?  Your retirement objectives at 40 are not the same at age 60.  Are making contributions to your IRA?  Your 401(k)?  Are you contributing the maximum? If you are behind, the IRS allows you to catch up, have you considered that option?  If you have attained the age of 701/2 you must take your “required minimum distribution” (RMD), have you done so?  You have until December 31 to comply. Remember, it is your responsibility.       

Your tax situation. Do you have any potential credits or deductions that can be used before the end of the year? The increase in the top marginal tax bracket for 2014 changed many options available to you.  Consult your tax preparer for any available options.  Maybe you could qualify for additional depreciation or other options available to you.   Have you sold real estate or stocks, repositioned your portfolio?  Do you know your tax basis on your non-qualified assets?  Possible there could be a loss available to you on a non performing asset.  Do you have any loss carry forward credits from previous years? 

 Charitable gifting. If charitable gifting is in your consideration, it is time to make those gifts. Most charitable gifts are tax deductible.   In addition to charities, you are also allowed an annual federal gift of $14,000 tax free to any other person and that person does not need to be a family member.  These gifts are not tax deductible but they can have a nice effect on downsizing your estate. Maybe you should consider an educational gift to help a family member.  You might consider gifting appreciated stocks to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid capital gains tax you would normally incur from selling them. 

Named beneficiaries.  Life insurance when paid to a beneficiary is tax free.  Have you made sure your desired beneficiaries are up to date?  Annuities are not paid tax free (any gain is taxable) but they can be received without probate expense or cost if a beneficiary is named.  Have you updated your annuity beneficiaries.  Have you updated your named beneficiary on your IRA?  401(k)?

Life changes.  Did your marital status change in 2014? Did you buy or sell your home?    Did you lose a family member? Did you receive an inheritance or a gift? Many of these circumstances can have an impact on your financial and tax liability.

Other possible important ages:  

Age 70 ½ , if so, you must now take Required Minimum Distributions (RMDs) from your IRA(s).

Age 62, if so, you’re now eligible to apply for Social Security benefits.

Age 59½, If so, you may take IRA distributions without a 10% penalty. 

It is time to review 2014, consult your professional advisors for additional help.  Remember important decisions should not be made without consulting a licensed professional.  

 

About the Author:

Bill Broich
Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet. To follow Bill's profile, click here.