2014 is winding to a close and with holiday shopping, school breaks, and other distractions, it’s often the busiest time of the year. It’s also a time to wrap- up any last minute activities relating to the 2014 year and one that parents cannot and should not ignore is personal finance. Let’s take a look at some of the financial responsibilities that need your attention before midnight, December 31, 2014:
Contribute to charity– If you want to deduct charitable contributions on your 2014 tax return, then you need to make sure to donate before year end. To be 100 percent certain that the donations apply to 2014, go to the charity’s web page and make a donation online. One additional advantage of using a credit card to donate online is that you can charge the donation in 2014, but not pay for it until 2015. Because the charge hit your account in 2014, you can still write it off on your 2014 tax return.
Add money to your 401k or similar work sponsored retirement plan– The contribution limit for 401k is $17,500 for the 2014 year. If you haven’t hit the limit, there is still time to contribute more money but it has to be deducted from your paychecks received in December 2014 to qualify. If you decide to do this, it will usually require a special meeting with your payroll specialist at work. You will have to ask them to confirm the total contributions made so far and then ask for a one- time deduction for an amount that will push you up to or close to the $17,500 limit, depending on how much you can afford.
If you have an IRA account, the situation is a little different. With these accounts, you do not have to contribute before the end of 2014. You can make contributions to an IRA all the way up to the point of filing your taxes and still apply the contribution toward 2014.
Adjust Withholding Allowances– Again, this will require a special meeting with your payroll specialist at work. If you had a change in household size just recently, then you will want to increase or decrease your federal/state allowances accordingly. Even if you didn’t have a baby or have a child move out of the home, it’s still a good idea to examine your claimed allowances and consider adjustments. If you feel your tax withholding is too much and would rather have more cash in each paycheck, you can increase your allowances. Likewise, if you feel your tax withholding is too low, you can decrease your allowances. Check with a tax advisor first if you’re not sure what you should do.
Spend Remaining Funds in your Flex Spending Account– If you have an FSA account, there is a good chance you will lose the money that has not yet been spent. Find out what your balance is and use the money before year end. If the balance is small, a visit to a nearby drug or grocery store and stocking up on essentials will do the trick. If the amount is large, consider a visit to the dentist or some other health- related facility. Unless your employer has a special carry over provision in the FSA plan, you will lose the money so be sure to spend before 2014 ends.
Sell Securities in your Brokerage Account– This won’t apply to everyone, but if you have stock or other investments and have been considering a sale, the timing is important. Whatever you sell before the clock strikes 12 a.m. on December 31, 2014, will go in the books as a capital gain (or loss) for the 2014 year. Depending on the size of the gain or loss, the tax owed could be significant and will become due when you file your 2014 tax returns. If you would rather put off the gains and the tax for another year, then wait until 2015 to sell.
Take IRA Distribution– If you just surpassed age 70.5 during the 2014 year, then you have until April 1, 2015 to take the required distribution from your IRA. If you reached age 70.5 before the beginning of 2014, then you must take the required distribution before the 2014 year end. Failure to take the money now will result in not just the usual taxes to pay, but also a 50 percent IRS penalty. This penalty is too large to ignore. so be sure to take the money before year end.
Copyright 2014, Bryan Carey