Start Your Taxes Now And Be Done In January

by | Oct 21, 2014 | Taxes

The days are getting shorter as your accountant savors the last few months of peace before the End-of-Year rush revs into gear. You like your accountant, why not make his or her job easier?

I’ve put together a list of some of the things you should be thinking about before year-end. Being prepared might just save you some money!

Charitable Contributions

  • If you have contributed over $250 to any one organization, make sure you have the acknowledgement letters that you received.
  • Make sure your charitable contributions are sent out by December 1st because the IRS looks at the date the check was cashed, not the postmark, when examining your contributions.
  •  In-kind donations are valued at the fair market price. For example, an old car donated to a charitable cause would be valued at the re-sale price.

Credit Report

  • The three credit reporting agencies are each required to issue a free credit report once a year to consumers.
  • If you haven’t checked already, I strongly encourage looking up your credit score every four months to take advantage of the free reports – or at the very least, once a year. You can find them at www.annualcreditreport.com.

Estate Planning

  • The end of the year is a good time to review your will. Any changes to your will take effect immediately.
  • If you have a trust in place naming a beneficiary, it will supersede your will.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)

There are important differences between these two different types of pre-tax accounts:

  • FSAs are accounts that are owned by your employer. You must spend all the money in an FSA by the end of the year or you will forfeit it.
  • HSAs are accounts owned by the holder (you). With an HSA, if there is money left over from this year, it will be rolled over into next year.

Preserving Wealth

  • Starting in 2013, the annual gift tax exclusion increased to $14,000 for an individual and $28,000 for a couple.
  • If you have set up life insurance or an irrevocable life insurance trust for someone, premiums paid on these policies are considered gifts and count against the annual gift tax exemption of $14,000 per individual.
  • Another way to avoid taxes is to pay for an individual’s medical or educational expenses – but only if you pay the institution directly. There is no tax on this sort of giving.

Refinance

  • Mortgage rates will continue to be low for 2014. This is your last opportunity to lock in those low rates, but you should start the process right away.

Retirement Accounts

  • If you surpassed 70 ½ years old, you have to take your required minimum distribution from your IRA accounts.
  • Any distributions from a retirement account are considered taxable income.

Planning now for taxes is your best chance at maximizing your tax savings – not only because of your deductions and credits, but also because your accountant will only need to do a fraction of the work he or she normally does for clients.

Do you have any other tax tips? Share them here!

Judith Heft

Judith Heft, Principal, Judith Heft & Associates is a personal financial concierge with offices in Greenwich and Stamford. She can be contacted via email at [email protected] or by phone 203-978-1858.