Wednesday, October 15, 2014

Fall brings 4th quarter and a chance for tax planning

As we're enjoying the fall colors, we're also heading into the last financial quarter of the year. There's plenty of time to look at where you are financially and make some changes before the new year.

- Assess your tax situation. Whether you're self-employed or you get a W-2, you don't have to be surprised each year when you file your tax return about to learn whether you owe, get a refund or broke even on taxes. Contact your tax preparer and ask for a tax planning appointment. You'll need to bring the documents the preparer asks for, and you can adjust your tax withholding or quarterly estimates accordingly. Remember, no one likes to pay lots of taxes in April, but a big tax refund is just an interest-free investment you made with the IRS, so don't see it as a great idea for you.

- Be sure you've contributed to your favorite charities. Nonprofits are accustomed to getting a surge in contributions toward the end of the year. Many people use the last few months of the year to contribute because it allows them to assess their ability to give. If the charities you prefer help those in need around the holidays, the sooner they get your cash contributions, the better they can assess their ability to help at that time. So feel free to get out your checkbook now.

- Clean up your wardrobe. What does that have to do with finance? If you give the clothes you don't wear to a nonprofit's thrift shop, you can get a tax receipt, which will give you a little extra money and allow you to update your wardrobe. Be realistic. If you haven't worn something for a year, give it away. Once you've gone through your closet, turn all the clothes so the hangers face the wrong way, with the open part of the hook out. If you get to the fall of next year and those hangers are still facing the wrong way, you haven't worn that outfit in a year and can put it directly into your thrift store pile.

- Maximize your retirement plan contributions. There are some retirement contributions - IRAs, Roth IRAs, SEPs and some others if you're self-employed - that you can make for this year after Dec. 31 and before you file your taxes for this year. But if you work for a company with some of the more popular plans - 401ks, 403bs, 457s - you can only contribute to the plan through paycheck withholdings and must do it for this year before Dec. 31. So take this opportunity to contribute as much as you can. If your employer matches some of your contributions, make sure you put in that much.

You can reassess your finances any time of year, and now is always a good time.