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Here is a list of items to keep in mind as the year winds down

It may seem early for year-end financial planning but don’t procrastinate on planning ideas. Investors need to give themselves and their advisor time to consider if an idea would be helpful and then have time to act on it. Some tax and investment strategies need to be started now to give them time to work and others face IRS deadlines to execute.

Here is a list of items to keep in mind as the year winds down in order to maximize your planned tax-saving strategies…


Set up your online IRS.gov and INTIME tax accounts.

Get organized now in order to prep for the upcoming tax season as well as view your current tax information and make upcoming quarterly estimate payments (deadline 1/15/22). We are recommending all clients setup their IRS.gov and INTIME accounts in order to improve the accuracy of this year’s tax return. With all of the stimulus, child tax credits, and legislative changes, it’s important to have the exact amounts that were received or paid. This information is easily accessible on these federal and state online accounts and takes just a few minutes to setup. We’ve put together helpful “how-tos” on how to set these up along with notes on everything these accounts have to offer. Click here for how to setup your IRS.gov account. Click here for how to setup your INTIME account.


Max out company retirement plan contributions.

Whether it’s with a yearend bonus or by upping your payroll contribution, targeting the IRS maximum contribution amount can be helpful now (tax savings) and in the future (more retirement savings). The 2021 retirement plan contribution limits are $19,500 for those under 50 and $26,000 for people 50 and over.


Contribute to a College 529 Savings account.

The tax benefits from the federal government for these accounts do not happen until funds are withdrawn and used for qualified education expenses. The growth on the accounts will not be taxed when used for qualified educational expenses such as tuition, room and board, books and computers. But Indiana offers a 20% tax credit annually on the first $5,000 added to an Indiana CollegeChoice 529 account. The account needs to be open and funded by the end of the year. Another great way for current and future tax savings. (If you’d like to contribute this year to an existing account, we’ll need your contribution information by 12/10/21 in order to meet the end of the year deadline.)


Review required minimum distributions.

Required minimum distributions (RMDs) are back again for 2021. RMDs are required from IRAs (excluding Roth IRAs) and 401K/403B accounts when the owner reaches age 72. Clients who have inherited IRA account established before 2020 and are stretching the distribution over their lifetime, must take a required minimum distribution (RMD) from the inherited IRA each year, regardless of client’s age. To avoid costly penalties, the RMD must be taken from the account every year before December 31.


Do a Backdoor Roth IRA contribution.

This strategy to fund get funds into a Roth IRA is currently still available. If household income exceeds the limit enabling a contribute to be made directly to a Roth IRA, there is still a way to add money into a Roth IRA account. We can create this opportunity by first contributing to a non-deductible traditional IRA and then converting the funds to a Roth IRA.


Prepare charitable donations and planned giving.

There are tax benefits of gifting cash, or other assets, to charity. With the higher limits for the standard deduction, getting a tax benefits for charitable giving is more difficult. Please continue to give to your favorite church or charity by the end of the year and we will determine if there is any the tax benefit when the return is prepared. Charitable gifts can be “bunched” where two year’s gifts are given in a single year and then skipped the following year. Giving appreciated investments and deducting the fair market value may be a win-win for donor and recipient organization.


Review health insurance and your health savings account.

In addition to funding your 401(k) plan, a great secondary goal is to contribute the maximum to a health savings account (HSA), if eligible. The 2021 maximum contribution for a family plan is $7,200 and $3,600 for single coverage. These limits do include funds contributed by the employer into the account. Funding for an HSA need to be done by 4/15/2022.


Check your flexible spending balance.

Typically an employer-provided dependent care and/or healthcare flexible spending account (FSA) does not allow for a balance carryover from year to year. It is a “use-it-or-lose-it” arrangement and you forfeit unused funds. But 2020 legislation allowed employers to amend their plans to allow for carryover of unspent funds. The last year for possible carryover is from 2021 into 2022. Your employer should know if this is allowed on your plan.


Finalize your divorce.

Are you going through a divorce? It may be in your best interest to finalize your divorce before year end. Why? Your filing status is based on your marital status on the very last day of the year (12/31/21). If you were married in 2021, you will be filing jointly with your new spouse (even if you were single for the majority of the year). On the flip side, if you are going through a divorce and it has not been finalized, then you will have to work together with your spouse on filing the return for 2021, as you will be considered “married” on the last day of the year.


Have questions about any of this information? Give us a call now!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.


Blog by Brian Biggs, CPA – Financial Advisor, Senior Tax Professional

Learn more about Brian and the rest of the Storen Financial team here.