End-Of-Year Tax Moves - Individual

Quick Summary: A little year-end tax planning can help reduce surprises when filing season arrives. Before December 31, review your withholding, retirement and health-account contributions, investments, charitable gifts, required distributions, education savings, and tax records. Eric J. Brunsen CPA helps individuals, families, farms, and small businesses in Iowa Falls make practical use of the tax-planning opportunities still available.

As the calendar winds down, it is easy for holiday schedules and family plans to take priority over financial tasks. Still, the final months of the year are an important window for reviewing your tax picture, since many planning choices must be completed before the year ends.

Tax filing may still be months away, but acting now can make the process more manageable. A year-end review may help limit unexpected tax due, reduce last-minute stress, and identify opportunities that may no longer be available after January 1. Whether your income, family, business, or investments changed this year, a few timely steps can help you begin the next year better prepared.

Check Tax Withholding and Estimated Payments

Your withholding should reflect your current circumstances, and those circumstances can shift during the year. Starting a new job, receiving a pay increase, retiring, earning investment income, becoming self-employed, or experiencing a family change can all affect your overall tax obligation.

When too little tax is withheld from paychecks, a balance may be due when the return is filed. On the other hand, excessive withholding means more money than necessary has been paid throughout the year.

It is equally important to review estimated payments if you receive income without regular withholding. This may include self-employment earnings, rental income, retirement income, or investment income. Underpaying can lead to a tax balance and possible penalties, so a year-end review can help determine whether an additional payment is needed before December 31 or before the last estimated-tax payment due date.

Review Retirement Plan Contributions

Year-end is a valuable time to look at retirement savings. Contributions to workplace plans such as a 401(k) or 403(b) generally need to be processed through payroll before the calendar year closes.

Increasing contributions during the remaining pay periods may reduce taxable income while adding to long-term retirement savings. It is also a good time to confirm that you are contributing enough to receive any employer match available through your plan.

Some taxpayers may also want to consider a Roth IRA conversion before year-end. A conversion generally creates taxable income in the year it is completed, but qualified Roth IRA withdrawals in the future may be tax-free. Because this choice depends on individual circumstances, it deserves careful review as part of tax planning in Iowa Falls.

Use HSA and FSA Benefits Wisely

A Health Savings Account, or HSA, may provide meaningful tax advantages for people covered by a qualifying high-deductible health plan. Eligible contributions may be deductible, account earnings may grow tax-deferred, and withdrawals for qualified medical costs are generally tax-free.

If you have not reached your contribution limit, there may still be time to add funds before the applicable deadline. Reviewing the account before year-end can help ensure you are making the most of the available benefit.

Flexible Spending Accounts also deserve attention. Many FSA arrangements operate under use-it-or-lose-it rules, meaning unused dollars may be forfeited if they are not spent within the timeframe permitted by the plan. Since employer plan rules differ, checking your available balance now can help prevent a loss of funds and can help you decide whether your next FSA election still fits your household’s needs.

Consider Investments and Income Timing

If investments declined in value during the year, tax-loss harvesting may be worth evaluating. Selling an investment at a loss can potentially offset capital gains, and in certain cases, excess losses may offset a limited amount of ordinary income.

This approach should be weighed against your long-term investment objectives. It is also essential to understand IRS wash-sale rules, which may reduce or eliminate the intended tax benefit when substantially similar investments are repurchased too quickly.

The timing of income and deductible expenses may also affect your tax result. Depending on your situation, it could make sense to accelerate deductions or postpone income until the following year. In other situations, delaying deductions or receiving income sooner may be more beneficial. The appropriate approach depends on your specific tax circumstances.

Plan Charitable Gifts Before Year-End

Charitable giving often increases during the last part of the year, and thoughtful planning may improve the related tax benefit. If you expect to make donations, retain receipts and written acknowledgments for each gift.

For some taxpayers, contributing appreciated securities instead of cash may be worth considering. Others who itemize may benefit from grouping multiple years of planned charitable gifts into one tax year.

Timing matters. Donations generally need to be completed by year-end to be included on that year’s tax return, so waiting until the final days of December can create unnecessary complications.

Complete Required Minimum Distributions

Retirees who are required to take Required Minimum Distributions, or RMDs, should make sure those withdrawals are completed before year-end. Failing to take an RMD on time may result in penalties, making this a key item to address during an annual tax review.

If you intend to support charitable organizations, a Qualified Charitable Distribution, or QCD, may be an option for eligible individuals. A direct charitable gift from an IRA may satisfy some or all of an RMD while providing favorable tax treatment.

Organize Education Savings and Tax Documents

If you are contributing to a 529 education savings plan, year-end is a useful time to check your contributions. Some states provide tax benefits for eligible contributions, and even modest additions can support education savings over time.

It is also helpful to begin preparing your tax records before January arrives. Gather and organize important documents such as:

• Receipts and acknowledgments for charitable gifts
• Mortgage interest and property tax records
• Investment statements and other income documentation
• Childcare expense information
• Self-employment income records
• Medical expense documentation

Having these records ready can make tax preparation smoother and may help prevent deductions or credits from being missed. This is especially helpful for individuals, farms, and small businesses that need clear, complete records at filing time.

Get Practical Tax Help in Iowa Falls

The last weeks of the year can move quickly, and many tax-planning opportunities end when the calendar changes. Reviewing withholding, retirement contributions, health accounts, investments, charitable plans, RMDs, 529 savings, and tax paperwork now can help reduce filing-season surprises.

Eric J. Brunsen CPA is a local CPA firm in Iowa Falls, IA, providing tax preparation and tax planning guidance for individuals, families, farms, and small businesses. With more than 25 years of experience, our team provides practical, one-on-one tax services for Iowa Falls and nearby communities, including Alden, Ackley, Eldora, and Hampton.

If you would like help reviewing the year-end tax options available to you, contact Eric J. Brunsen CPA before the year ends. We can help you understand the choices that apply to your situation and prepare for a smoother tax season.