Sunday, December 21, 2014

Give Yourself the Gift of Year-End Tax Planning

You'll wake up at 4 a.m. to get door-buster deals. You'll clip coupons to save 50 cents on pasta sauce. None of that compares to what you can save by doing a little year-end tax planning. To start, give yourself a gift your can enjoy in your golden years.

Contributing to your retirement account is a great idea. Not only does it help you save on your current year's taxes but it also helps you build that retirement nest egg.

You'll need to go through your human resources department to adjust your 401k contributions, but beefing up your IRA is a lot easier. You can contribute up to $5,500 a year—more if you're over 50 and you have until April 15 to do it. Don't have the cash now? Play with the calendar a little.

You can actually file your return early, claiming the IRA contribution, use your refund and then make the IRA contribution as as long as it's before April 15th,

Another way to save is to spread the wealth and make a donation to charity.

It's good for the community. It's good for your piece of mind, it makes you feel good and at the end of the day, you also save on your taxes and you still have a couple weeks to do that,

If you lessened your taxable income by putting money in a flex spending account, make sure you've used it. While December 31 used to be the deadline, a change in the law means some employers now give you until the end of January, so make plans to see your doctor or get new glasses to use up what's left.

If you do need to sign up for a government-sponsored plan, he says do it now.

Because the penalty for noncompliance goes up significantly in 2015.

The deadline for open enrollment is February 15.

Finally, if you have business-related expenses, get them on the books before the ball drops so you can deduct them on your 2014 taxes. On the flip side, if your sending out invoices for work you've done or services you've provided, you may want to wait.

You might want to consider billing for it in January so you can defer the tax impact of that until next year.

Depending on where you live, you may also be able to lessen your state taxes by putting money into a 529 college savings plan.