End of Year Checklist for Individual Taxpayers

End of Year Checklist for Individual Taxpayers

Today, I am going to be talking to you about a year-end checklist for individuals. These are things you should be considering while you are wrapping up your tax planning for the current year. Such as: 401k, IRA, HSA, health savings account, tax-deferred vehicles, etc.

Video Transcript - Year End Checklist for Individual Taxpayers

It's time to get down to the brass tacks. My name is Mel Sams, and I'm the managing associate of Sams CPA. Today I'm going to talk to you about a year-end checklist for individuals. These are things that you should be considering while you're wrapping up your tax planning for the current year.

We all know that when we get into the November and December months with the holidays we all get very busy, spending time with family. We get busy planning for the upcoming year. We get busy doing a lot of personal things, and one thing that I don't want you to lose sight of is taking advantage of a few tax breaks that we can achieve between now and the end of the year.

The first thing I'd like you to ask yourself is, have I maxed out or will I be maxing out my qualified plans through my employer, my HSA, health savings account if I have one of those, and any other tax deferred vehicles that I may have through my work or personally. This can range from a 401k plan to an HSA plan, as I mentioned, to other qualified plans that you may have such as deferred comp. The point here is is that as we get closer to the end of the year, we need to make sure that we're on track to either reach the maximums on these amounts that we're allowed to do, or that we know that what we've done so far is going to fit well into our tax plan for the current year.

So make sure you look at that. Look at your pay stub. Talk to your HR department. Make sure that you've taken advantage of these things that are in place for you.

Another thing that we commonly have during the holiday season is a lot of us like to give to charity. Charities are at their greatest times of need in the holidays given the amount of support that they provide to needy people. You may say, "Well, I usually write a check to my favorite charity around Thanksgiving or Christmas," but let me give you another option. You can make a gift of stock to a charity, and where that benefits you and the charity is that you can take a highly appreciated stock, you can transfer those shares to the charity, and I would be willing to bet you 99% of the charities out there already have a mechanism for accepting these shares of stock and would love to get them.

But you can make that gift, the deductible gift is the fair market value of the stock on the day of transfer. The benefit to you is you will not receive a capital gain income item because you're not selling anything. You're transferring it. So we're allowed to avoid realizing a large gain but also maximize our deduction for charity. And once the charity has the stock, they can then in turn sell it or do whatever they plan to do with it and receive the funds. So at the end of the day, we all win.

The next item that I'd like to ask you about is, have you talked to your financial adviser about how your portfolio is going to end the year? What I mean by this is many times in our stock portfolios we might have some stocks that have done very well. Hopefully you have a lot of those, but we also may have some that have not done well or aren't going to do well. You need to ask you financial adviser if they have harvested any losses this year to offset any gains that you may have. Now what that means, harvesting losses is we in conjunction with your financial adviser take a look at your portfolio towards the end of the year. We look at the tax ramifications of a sale. Your financial adviser looks at what would be an investment that you should get out of, and if there's a loss on that sale we can use that to cancel out any gains that you may have had throughout the year.

Sometimes we do this, sometimes we choose not to, but the point is we have the discussion and we make an informed decision. So make sure you ask your financial adviser about that.

Finally, along that same line, have you taken your RMDs from any qualified accounts that you're required to take those from? What an RMD is is a required minimum distribution, and generally if we're beyond age 70 1/2, then our IRAs, traditional IRAs, our 401k if we're no longer working, and other qualified accounts, we usually have to start taking withdrawals every year from that.

Now, most financial advisers and brokerage houses are very good about notifying you about this, and calculating what that amount needs to be. But where I see people get in trouble with this is when they've inherited an IRA from someone who has passed away. That inherited IRA may not be well tracked. You may not have a financial adviser who's talking to you regularly, and you may not know if you need to take RMDs.

For instance, if you inherit an IRA from someone who was already taking RMDs, you are required to continue taking those even though you may not be 70 1/2 yet. A lot of people miss that. And there's a 50% penalty if you don't take them out. 50% of the withdrawal is a penalty that we don't get to deduct, that the IRS could hit us with down the road. So make sure that if you're supposed to take RMDs, that you do it by the end of the year.

If you have any questions, comments, or ideas for future videos, please let us know.