Last Minute Tax Tips for 2016
No one wants to think about taxes in the midst of the holiday season, but last-minute tax savings may be the perfect gift for someone on your list.
Here are some tax tips for both young and old:
Over 70 ½ and a traditional IRA owner?
Don’t forget to withdraw your RMD (Required Minimum Distribution). There is a minimum amount that IRA owner’s must withdraw from their accounts after they have reached age 70 ½. Don’t forget. The penalty is steep: 50% of the amount required to be withdrawn.
Don’t need your RMD?
Give it to your favorite charity. Funds transferred from your IRA directly to a charity can satisfy your RMD requirement AND lower your income. You won’t get a charitable deduction because the IRA distribution is not reported on your tax return, which is even better! Lower income means lower taxes for you and more dollars for your favorite charitable organization.
Have you funded your traditional IRA or Roth IRA this year?
The deadline for IRA contributions is April 18, 2017, this year’s filing deadline. If you make your 2016 contribution after December 31, 2016, alert your account’s custodian that it is a 2016 contribution.
Did you maximize your 401(k) contributions?
Even if you can’t afford the maximum contribution, $18,000 for 2016, $24,000 if you’re 50 or over, you should still contribute the full amount that will be matched by employer contributions. No reason to leave money on the table.
Year-end Charitable Contributions Reminder.
Make sure contributions are delivered to donors by December 31st. If you charge a charitable contribution to a credit card by December 31, 2016, it’s deductible in 2016 even if the credit card bill isn’t paid until 2017. For contributions over $250, be sure that the church or charity provides you with a letter or receipt that conforms to IRS requirements.
If you pay estimated taxes, your final 2016 payment is due January 15th, 2017. If you need a little bump in your itemized deductions, pay your state estimated taxes by December 31, 2016.
Start gathering your tax documents.
It’s a good time to pull out your tax folder, envelope or file, add last-minute receipts and get ready for year-end tax documents to arrive.
Have a safe and fun holiday season, no matter how you celebrate. Give us a call if you have any end-of-the-year questions or concerns. Otherwise, we’ll see you in 2017!
Written By Melissa L. Spoharski, EA