The final months of the year can be a good time to assess your finances and see what kinds of changes you might want to make before the end of the year. This can help ensure that any tax advantages will be in place in time for you to file taxes. There may be other end-of-year financial deadlines you want to observe as well, such as those associated with flexible spending and other types of accounts.
Review Your Taxes
Whether you are a regular employee who has tax deducted from your paycheck or you are self-employed, you don’t want to get an unpleasant surprise when tax filing time rolls around. Using a free tax calculator can help you determine whether your withholding amounts are correct if you are an employee or if you are making the right quarterly payments if you are self-employed. If you are not, you can change your withholding or your quarterly payments to reflect your actual income and what you owe in taxes.
Look at Flexible Spending Accounts
If you have medical or dependent care flexible spending accounts, you may to review them. The rules for individual types of accounts differ, but you may need to either deplete your FSA before the end of the year or there may be a certain amount you can roll over. You should be sure that you are using the entire balance in your dependent FSA since these cannot be rolled over to the following year.
Check Your 529 Distributions
If you have a child in college or if you or your spouse are in college and you are using a 529 plan to pay for any part of it, you should make sure that you are paying any expenses in the same year you are taking a distribution. Normally, this is not an issue, but at the end of the year it can be tricky. You need to make sure that if you have a bill that is due in January, you either wait until then to take the distribution or you take the distribution before the end of the year and pay it then. Otherwise, your withdrawal could be subject to tax and penalties.
Look at Your Retirement Accounts
If you have a 401(k) plan or another retirement account, you may want to take a look at your contributions. If you have not contributed your maximum for the year and you are able to do so, you can adjust your contributions for the remainder of the year. You might also want to review your retirement investments and determine whether you want to change them.
Consider Making Charitable Contributions
Tax benefits are only reason to make charitable contributions, and many people may not benefit more from taking a standard rather than an itemized deduction anyway. However, you might want to consider whether there are any contributions you want to make before the end of the year and if you want to make them in an amount high enough to make itemizing worthwhile.