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Five Annual Tax Essentials

Published by Dave Danic on 05 Dec 2018

To make sure you aren’t missing out on deductions or something that may cause a big headache when it’s time to file your taxes, here are 5 tax items you should mark on your calendar to be reviewed annually.

1. Your required minimum distributions. For those 70 ½ or older, you may be required to take minimum distributions (RMD) from your retirement accounts. If you forget to take your RMD you may face substantial fines or up to 50% of the amount you should have withdrawn from your accounts. Your RMD must be completed by December 31 each year after you turn the required age of 70 ½.

2. 5 TAX PLAN ESSENTIALS pondering_board_text_11183IRS PIN. Have you experienced IRS identity theft? If you have, for additional security, you will be mailed a one-time use, personal identification number (PIN). You should be receive your PIN some time in December. This PIN will be required when you file your Form 1040. You can sign up for the PIN program using the IRS website.  FYI: There is no “opt out” once you are enrolled in this program. For all your future IRS tax filings you will be required to use your PIN.

3. Retirement Contributions. Do you want to make last minute contributions to your qualified retirement accounts? The limits are $5,500 for Roth or traditional IRAs. If you're age 50 or older, you can contribute an additional $1,000. To be deducted on your 2018 tax return, any contributions made to traditional IRAs must be made by April 15, 2019.

4. Gains and losses. Your investment profits and losses have a tax rate from 0% to 37%. You should plan to perform an annual tax review of any investment moves you want to make, including:

* Knowing that investments that are held longer than 1 year have lower tax rates as long-term capital gains.

* Trying to net ordinary income tax investment sales with long-term investment losses.

* Utilizing the full annual $3,000 loss limit on investment sales.

When it comes to your investment sales and income taxes, timing matters. Having a year-end strategy may help reduce your tax bill.

5. Year-end tax moves. Although any last minute tax moves may be limited, consider these ideas:

* Maximize your itemized deductions by making a donation to your favorite charity.

* If you’re older than 70 ½, you could contribute up to $100,000 from your retirement accounts to a qualified charity.

* If you’re over 59 ½, you could make tax efficient withdrawals from your retirement accounts.

* If you are a small business, you could delay the receipt of income or accelerate expenses.

* You might consider taking advantage of the annual $15,000 gift giving limit.

By understanding your current circumstances and having a strategy in place will maximize your tax savings and allow for a smooth tax filing process. At Summit CPA we offer multiple resources to assist you with all of your tax and financial planning needs. Contact our office at (866) 497-9761 to schedule an appointment with our advisors.