Broker Check

YEAR END CHECKLIST

October 13, 2020
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For Employees:

  • Are your workplace retirement plan contributions in line with your goals and are you taking full advantage of the company match, if applicable?
  • Have you had a change in the number of dependents, and do you need to adjust withholding as a result?
  • Do you have a Flexible Spending Account (FSA) – is there money left to be spent in 2020 or can some/all of the remaining balance be rolled into 2021?

For Those with Taxable Investment Accounts:

  • Considering the volatility this year, can you realize capital losses, up to $3000 of which can be counted against income in any given year (with the balance carried forward)?
  • Depending on your income level, does it make sense to realize capital gains (for those in the lower two tax brackets, it’s possible that your gains would not be subject to capital gains taxes at the federal level)
  • Do you own actively managed funds that are going to pay large capital gains? If so, would it be a good time to look at moving to more tax-efficient investment vehicles?

For those with IRAs/Roth IRAs:

  • Are you eligible to contribute and should you consider doing so if you haven’t reached the maximum contribution?
  • Do you have charitable intentions, and would this be better accomplished through a Qualified Charitable Distribution (QCD) than an outright gift of cash?
  • If you give annually to specific charities, do the new standard deduction numbers make it more advantageous for you to ‘stack’ your contributions in the current year? (This is essentially making two or more years’ worth of gifts in one year to allow you to itemize deductions and therefore, take advantage of the charitable deduction).
  • Do Roth Conversions make sense? For those with large IRA balances who have less income than normal in 2020 or are at/nearing retirement, converting money from IRAs and 401(k)s, etc., can make sense in the context of a long-term investment plan. If you’re wondering whether or not this could save you tax dollars in the future, best to consult with your advisor and tax professional.
  • Required Minimum Distributions: These are not mandatory in 2020, but will be again starting next year. For those of you with an Inherited IRA that was opened in 2020, you will now be required to distribute the entire account within 10 years – careful tax-planning is important for those in this situation.

For those with kids in college or with future college expenses:

  • Make sure that 529 contributions and distributions are handled in the correct timeframes, so they are taxed (or not) correctly and so that you don’t negatively impact financial aid calculations.

Health Insurance To Dos:

  • For those on Medicare, make sure to check on Part D plans. Drug Coverage Formularies (list of the drugs your policy covers) can change at any time and this could dramatically impact your out of pocket costs for drugs. If you would like a second opinion on this, we can point you in the right direction. The open enrollment period is October 15 to December 7, 2020.
  • For those with an Exchange Plan (otherwise known as an Obamacare or Affordable Care Act Plan), make sure you use the open enrollment from November 1, 2020 to December 15, 2020 to make sure that you choose the option that best fits your current needs. These plans can change in cost drastically from one year to the next and new providers are occasionally added, as well. Some non-ACA compliant plans are now available also. For those of you with HSAs or who wish to contribute to HSAs in the future, it’s vital that you select an HSA compatible plan.

For all taxpayers:

  • Keep in mind that outside of funding a couple of different account types (IRAs, Roth IRAs, HSAs) most tax-planning needs to take place PRIOR to year end if you wish for it to impact 2020 taxes. Don’t wait until 2021 to address this.

Review your financial and estate plans, as well, and make necessary adjustments if your situation has changed.

 

This is meant for educational purposes only.  It should not be considered individualized advice, nor does it constitute a recommendation to take a particular course of action. Please consult with your financial, tax and legal advisors regarding your personal situation prior to making any financial related decisions.  (10/20)