The end of the year is creeping up fast, and while you’re busy planning holiday gatherings and gift lists, don’t forget about something equally important—your taxes! Year-end compliance is the key to staying stress-free when tax season rolls around. Let’s tackle this head-on with some easy-to-follow tips that could save you big bucks.
Boost Your Retirement Savings
- Max out your contributions to retirement accounts like 401(k)s and IRAs before December 31.
- Not only do you save for the future, but you also lower your taxable income for the year.
- Contribution limits for 2024:
- 401(k): $23,000 ($30,500 if you’re 50 or older)
- IRA: $6,500 ($7,500 if you’re 50 or older)
- Pro Tip: If you’re self-employed, don’t overlook SEP-IRAs or Solo 401(k)s for even bigger savings.
Harvest Investment Losses
- Sell underperforming stocks before year-end to offset any capital gains.
- This strategy, called tax-loss harvesting, reduces your taxable income.
- Avoid the IRS wash-sale rule, which disallows deductions if you repurchase the same security within 30 days.
Double-Check Withholdings and Estimated Taxes
- Review your tax payments to ensure you’ve paid enough to avoid penalties.
- Check withholding amounts or estimated tax payments.
- Overpayments lead to refunds; underpayments might incur penalties.
Take Required Minimum Distributions (RMDs)
- If you’re 73 or older, take your RMDs from retirement accounts before December 31.
- Missing this deadline could result in a penalty of 25% of the amount not withdrawn.
- Don’t leave money on the table—plan ahead!
Organize Financial Documents Early
- Gather receipts, pay stubs, and investment statements to prepare for tax filing.
- Well-organized records make filing faster and help identify deductions.
Make Charitable Donations
- Contributions to qualified charities can be deducted from your taxes.
- Donate appreciated stocks or mutual funds to avoid capital gains taxes.
- Keep proper documentation for donations.
Prepay Business Expenses
- Small business owners can prepay expenses like rent or supplies to lower taxable income.
- Plan purchases strategically to maximize deductions.
Final Thoughts
Year-end tax compliance doesn’t have to be overwhelming. Taking a few proactive steps now can help you reduce your taxable income, avoid penalties, and set yourself up for success in the new year.
Call to Action
Need personalized guidance? Reach out to our founder, Anshul Goyal, CPA, at anshul@kkca.io for expert tax planning advice and compliance assistance. Let’s make tax season stress-free together!
Disclaimer:
This blog is intended for informational purposes only and should not be considered formal tax advice. This blog is intended for informational purposes only and reflects general tax concepts based on current laws and regulations.