Don’t Delay! To-Do List for the End of the Year

/ December 2, 2014

Man Working on Finances - iStockIt is hard to believe we are at that time of year again when a new year will be upon us in only a matter of days. The countdown is on – only 30 days until 2015. Here are a few reminders of things to do before we say goodbye to 2014.

Take Your Required Minimum Distributions

If you have not done so already, but are required to do so, do not forget to take your required minimum distributions (“RMDs”) from your various accounts funded with pre-tax dollars by December 31st (unless it is the first year you are required to take a distribution). Failing to do so carries a significant penalty of 50% of the undistributed RMD. Consult with a tax professional or financial advisor to determine whether you are required to take a minimum distribution and the amount of the RMD.

Offset Capital Gains

Review your non-retirement accounts for exposure to potential capital gains. Capital gains exist if you sell a position at a gain or, in the case of mutual funds, have a gain distributed to you. A year-end planning tip is to find losses within your financial portfolio to offset those gains and minimize tax liability. Again, consult with a tax professional or financial advisor to identify your exposure to capital gains.

Secure Health Insurance

Do you have health insurance coverage? If you have not secured health insurance yet you should do so by the end of the year. If you do not, you will have to report on your 2014 tax return that you did not have coverage for the year and will have to pay a fee of the higher of 1% of your yearly household income or $95.00 per person for the year (with a maximum penalty for a family of under this flat fee of $285.00). The fees will increase each year you are not compliance with the mandate. There are exemptions to the fees but you will want to confirm whether you meet the criteria.

Organize Tax Items

It is never too early to start getting your tax information organized for the upcoming annual filing deadline. Obviously it is advisable to keep things organized throughout the year but if you do not, now is the time to start pulling together various receipts of charitable donations, medical expenses, and estimated tax payments made throughout the year. Also, pull out last year’s tax return to help make a list of the items you can expect to receive to complete your tax return, such as W-2s, various 1099s (for earned interest, dividends, etc.), K-1s, and paid interest statements (for mortgages, student loans, etc.). Having that list will make it easier to identify what you are missing if you do not receive an item in the mail. Starting this process now helps you, and your tax preparer, avoid the common fire drill that so many people face in April of next year.

Make Personal Gifts

If it has been determined that you should make some personal gifts to individuals under the annual gift exemption limit, be sure to make those annual gifts by December 31, 2014. As a reminder for 2014, you can gift to as many individuals as you like an amount up to $14,000.00 for the year without incurring gift tax or reporting requirements. It is advisable to keep a record of those gifts for future reference if it is ever needed but you do not have to report them under a tax return if the amount remains under $14,000.00 per gift recipient. If the gifts are not made by the end of the year, any gifts made starting January 1st will be allocated to the limit for next year.

Make Charitable Donations

Similarly, you should make any charitable donations by December 31st as well that you want to claim under your 2014 tax return. These donations can be monetary or in kind but for the latter be sure to keep thorough records of the donations (with detailed lists of the items and photographs are even suggested and a receipt from the recipient organization).

If you have any more questions about what you should do in preparation for the New Year, feel free to contact a financial, tax or legal advisor for advice.