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Checking it Twice – Year-End Financial and Tax Planning To-Do’s

by Peter J. Creedon

2015 is rapidly coming to an end, we are all asking ourselves, where did the time go? Time waits for no one and a New Year is about to start. Although the holiday season is busy, packed with festivities and cheer, it is also an opportunity to sit down and get a jump start on 2016. Take the opportunity to review your current situation to determine if there are any financial or investment planning, including tax opportunities that can be beneficial to you. This is an important step towards ensuring your financial plans are on track and reaching your financial goals.

Financial and Tax Planning Tips to Consider Before 2016:

Meet with your CPA (accountant) and CFP®* (Certified Financial Advisor) or Financial Planner

It is important to do your year-end reviews with your trusted representatives to ensure you are on track to not only meet your obligations (taxes, expenses) but to discuss strategies for the coming New Year. Are there any upcoming decisions/changes that will impact your tax liability, financial situation, risk tolerance, or a change in work or life’s direction? Important information to disclose to your advisory team would be: a raise, bonuses, 401K distributions, marriage or divorce, a new family member that is due, sale and/or purchase of a home, sales and/or purchase of a business, business or investment gains or losses, to name a few.

If you’re a Freelancer, make sure your Estimated Tax Payments are submitted and accurate

If you’re a Freelancer or Independent Contractor (1099 status), you are more likely paying your taxes through a system called: estimated taxes, also known as “quarterlies”. This means you make payments four times per year as you earn the money. 2015 payments are due on the following dates: April 15, June 15, September 15, and January 15(2016). You only need to pay Estimated Tax Payments if you expect to owe at least $1,000 in federal tax.(1)

Consider Gifting Strategies

If you are already thinking of donating money to Charity, you should think about the best strategy to do so. A donor may not claim a deduction for any contribution of cash, a check, or other monetary gift unless the donor maintains a record of the contributions in the form of either a bank record (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution.(2)
As of 2015, you have the option of reducing your taxable estate of gifting up to $14,000 per year for a single person, and up to $28,000 per year for a couple, without getting hit by any tax ramifications to you or the gift recipient.(3)

Important note: make sure your gifts are transferred with enough time for the transaction to be completed prior to December 31, 2015.

Review and Maximize Retirement Contributions

If you do not have a retirement account (financial independence) set up, this is the time to do it. If you have a retirement plan, make sure to make your contributions, as this can help you reduce your taxable income, as well as your overall tax liability.

Maximum contributions may vary, depending on your plan, but for 401(k), 403(b), 457(b) and the federal government’s Thrift Savings Plan, it is $18,000 for 2015. If you are over age 50, the catch up for these plans are $6,000. If you have an individual Traditional (IRA) -(Individual Retirement Account) or Roth (IRA) you can contribute only $5,500 with a catch-up for over age 50 with an additional $1,000. (4) Only the Traditional (IRA), not the Roth (IRA) is deductible on your tax return. If you have changed jobs and left your 401(k) at your former employer, remember to rollover your 401(k) into an IRA or another 401(k). Should you take the money out as a cash distribution from your former employer 401(k), there may be tax ramifications, consult with your CFP®* (Certified Financial Planner) or Financial Advisor. Of course there are exceptions, know your choices and alternatives before year-end tax time.

Profit or Loss from a Sale (Capital Gain or Loss)

If you sold an investment, asset or residence you may owe taxes on the gain or use the loss to offset another gain. Depending on the time you owned the investment, over one year or under one year, is important and should be high priority on topics discussed. If you sell an investment that you held over one year, then it is usually considered a long term capital gain, under one year is usually a short term capital gain. The Gains or Losses are treated and taxed very differently for tax purposes. If you sold an investment you may be able to offset part or all the gain with a loss from another investment.

Review your Health Insurance Coverage

As of 2014, every individual is required to have health insurance or they will face a penalty on their tax return. The annual fee for not having Health Insurance in 2015 is: $325 per adult and $162.50 per child (up to $975 for a family) or 2% of your taxable income – whichever is greater. The monthly fee is 1/12 of the total fee for each month you don’t have coverage or an exemption.(5)

In 2016, the Individual Shared Responsibility fee for not having insurance is: $695 per adult and $347.50 per child (up to $2,085 for a family), or it’s 2.5% of your household income above the tax return filing threshold for your filing status – whichever is greater. You’ll pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.(5)

You need to seriously consider health insurance, if you do not have coverage, not only to protect yourself from potential significant costs if you need assistance but you should take care of your most significant asset, you. There are a variety of Health Insurance coverage plans available and many consider income in the cost of coverage.

Review your Insurance

Life, Disability, Long Term Care, Homeowners, Car, Umbrella Insurance, if applicable. There may be changes which have occurred during the year e.g. you got married, divorced, death in the family, you became disable, you had children, you changed jobs, or lost your job, your health has changed, you became an owner or partner of a business. These are just a few areas to review as it relates to your insurances.

Hello 2016!

For additional information, please contact: info@crystalbrookadvisors.com

Contributor: Inger Kvalvik


(1) Source: IRS Gov, “2. Estimated Tax For 2015.” https://www.irs.gov/publications/p505/ch02.html

(2) Source: IRS Gov, “Written Record of Charitable Contribution.” https://www.irs.gov/Charities-&-Non-Profits/Contributors/Written-Record-of-Charitable-Contribution

(3) Source: IRS Gov “Frequently Asked Questions on Gift Taxes.” https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

(4) Source: IRS Gov, “IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015”

(5) Source: Obamacare Facts, “ObamaCare Mandate: Exemption and Tax Penalty.” http://obamacarefacts.com/obamacare-mandate-exemption-penalty/

* Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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