The Year End Money Saving Checklist
As
for most women, the end of the year is the busiest time of the year. There are cookies to bake, presents to buy and holiday parties to attend and before you know it January 1st
will be upon us and you will wonder where December went. During the hustle and bustle of the holiday cheer, it is important to remember certain tax saving steps or other tasks that must be completed before December 31 – many of which if not acted upon before year end will result in higher taxes and unnecessary lost dollars. Here are some quick reminders:
1) Flexible Spending Accounts (FSAs) – Taking advantage of your company's flexible spending accounts is a great way to decrease your taxable income (
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catch is you will lose any money you pledge to the account, but don't use by the end of the year. For example, if you have $1,500 allocated to your spending account and you only use $500 of the money, you will
lose the remaining $1,000 forever. So check your total expenses spent to date against your flexible spending account balance and if you have any money left over spend it – use it or lose it. May be you
could use a new pair of glasses or an extra set of contact lens. It is your hard-earned money -- why lose it.2) Take Extra Tax Deductions – Are you leaving any tax deductions on the table? Most
tax saving tactics must be taken before December 31. Have you considered making a charitable contribution or paying your January mortgage payment in December to reduce your taxable income? If you are
self-employed and/or make quarterly state income tax payments, you may want to pay your January payment in December to further reduce your taxable income. 3) Avoid Income Tax Penalties – If you under pay
your tax liability, you may be hit with a penalty. In most cases, you must pay at least 90% of your total tax liability or have paid at least as much as you paid last year to avoid any penalty. Events that
may affect your taxable income are: 1) Significant capital gains from stock or mutual fund transactions, 2) Selling real estate, 3) Income resulting from a side business or consulting fees. Notify your tax advisor
if any of these situations have taken place so that any adjustments to your tax withholdings can be made as soon as possible. 4) Set Up a Keogh Plan – If you have self-employment income, you can defer some
income through a Keogh plan, even if you work for someone else. To qualify Keogh plans must be established by December 31, but contributions may be made up through the April 15 due date or the date of any
extensions. |
