As the year comes to a close, it’s time to get things in order to help your tax filing process go smoothly. A little preparation now can save you time, stress, and possibly money come tax season. Here’s a comprehensive year-end tax checklist to help you wrap up your finances.
1. Review Your Contact Information:
- Double check that all of your demographic and contact information is correct with your employer, banks, brokers, student loan providers, and colleges. This will ensure that all of your forms (such as W2s, 1099s, 1098-Ts, etc.) are sent to the correct address or email.
2. Track Your Deductions:
- Charitable Contributions: Gather receipts for any donations made to qualifying charities. Consider donating appreciated assets (stocks) for extra tax benefits.
- Mortgage Interest & Property Taxes: Review your mortgage statements and property tax bills to maximize deductions.
- Medical Expenses: If they exceed 7.5% of your AGI, collect receipts for medical costs, prescriptions, insurance premiums, etc.
- Student Loan Interest: Obtain documentation of interest paid on student loans.
3. Maximize Retirement Contributions:
- 401(k) Contributions: You can contribute up to $23,000 to your 401(k) for 2024.
- IRA Contributions: If eligible, contribute to an IRA or Roth IRA before the year-end deadline (typically April 15 for prior year). For 2024, you can contribute up to $7,000.
- SEP IRA or Solo 401(k): For self-employed individuals, make contributions to a SEP IRA or Solo 401(k) by year-end. The maximum contribution amount for these accounts depends on your income level.
4. Review Your Tax Withholdings
- Adjust W-4 (if needed): If you’ve had life changes (marriage, divorce, additional dependents), update your W-4 to adjust your withholdings for the next year.
- Check Withholding: Use the IRS’s online withholding estimator to ensure you are on track for the correct withholding.
5. Plan for Capital Gains & Losses
- Tax-Loss Harvesting: Offset taxable capital gains by selling investments at a loss. It is best to meet with a financial advisor to see if this is right for you.
- Review Investment Sales: Ensure you report any stock sales or other capital assets sold.
6. Consider Tax Credits
- Child Tax Credit: Make sure you are eligible for the Child Tax Credit and that all necessary paperwork is in place.
- Earned Income Tax Credit (EITC): If you qualify, verify your eligibility for this credit based on your income and dependents.
- Education Credits: If you paid for education expenses, check if you qualify for the American Opportunity Credit or Lifetime Learning Credit.
7. Check on Your Health Savings Account (HSA)
- HSA Contributions: Max out your HSA contributions if you’re eligible and able.
- HSA Distributions: Make sure all distributions are used for qualified medical expenses. Make sure you have organized receipts for all distributions.
8. Review Business Expenses
- Track Deductible Expenses: If you’re self-employed, ensure you’ve documented all business expenses, such as office supplies, mileage, home office costs, and equipment.
- Quarterly Estimated Payments: Ensure that you’ve made any necessary quarterly estimated tax payments.
- Depreciation of Assets: Review any assets you purchased for your business that may qualify for depreciation or Section 179 deductions.
9. Review Your Filing Status & Dependents
- Filing Status: Ensure your filing status is correct (Single, Married Filing Joint, Head of Household, etc.).
- Dependent Information: Make sure all dependents are properly claimed, especially if there have been changes in custody arrangements, births, or other family circumstances.
10. Organize and Store Your Records
- Collect Documentation: Organize receipts, statements, and records for all income, expenses, and deductions.
- Create a Tax Folder: Keep all relevant tax documents (W-2s, 1099s, mortgage interest statements, etc.) in one place for easy access when preparing your return.
- Electronic Records: Ensure electronic versions of all documents are stored securely, in case you need to refer to them in the future.
RT Accounting Services can walk through this checklist with you so that you’ll be better prepared for tax season and can ensure you are maximizing deductions, credits, and contributions, while minimizing your tax liability.