Tax Tips For Year End

tax tips

By: Tana Gildea


With the stress of the holidays, who has time to think about taxes? No one, but there are a few important questions worth considering before 2019 fades away:

  • Do you have to take a distribution from your IRA or retirement plan this year? If you are over 70 ½, then required minimum distributions are, well, required. The penalty for failing to take one is hefty – a whopping 50%! You want to make absolutely sure that your distribution is processed by December 31. Contact your account custodian or advisor if you have questions about it.
    • Is giving to charity part of your spending plan? If so, consider making a “Qualified Charitable Distribution.” This technique sends money from the IRA to the charity directly, and you do not report it as income. It satisfies the required distribution and saves you taxes – It works like a tax deduction without needing to itemize your deductions! Note that only people required to take a distribution (those over 70 ½) are able to use this strategy.
  • Which tax transactions must be completed by December 31 to apply for 2019?
    • Charitable donations, medical expenses, mortgage interest, and state or property tax payments must be paid by December 31 to be considered for the 2019 tax year. These are all itemized deductions that you would report on Schedule A. With the standard deduction at $12,200 for single taxpayers and $24,400 for married couples, many people find that they don’t have deductions surpassing the standard deduction. You can take a look at your 2018 return to see if you itemized or took the standard deduction.
    • Required minimum distributions for most people must be completed by December 31. There is some wiggle room if you turned 70 ½ in 2019 (but remember, if you push it off until 2020, you still have to take 2020’s distribution as well! Check with your tax advisor to see what is right for you.)
    • Income received in 2019 must be reported on your tax return even if you didn’t deposit the check until 2020.
  • Aren’t there some tax items that can be pushed off to 2020 and still be shown on a 2019 tax return?
    • IRA contributions and health savings account contributions do not have to be complete by December 31; those are due by April 15th. If you want to make these contributions, start setting aside the money now. Remember, you must have earned income to contribute to an IRA and you must have a high deductible, health savings account qualified health plan to fund the HSA.
    • Retirement plan contributions for the self-employed generally must be made by the due date of the tax return with extensions.  That means that you may have until October 15 of 2020 to make those contributions. Check with your plan specialist to understand the deadlines applicable to your plan.
    • Distributions to beneficiaries from estates and certain trusts may be made up to 65 days after year-end and still be considered 2019 distributions. This allows the trustee some time to determine the income and process the distributions. If you are a trustee, discuss the timing with your advisor to see if this applies to your situation.

Taxes never put anyone in the holiday spirit but spending a little time focused on these few tax items that are time-sensitive might just make your April 15 a little bit brighter.

Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients.