What Happens If You Skip Fiscal Year End Planning? – Orange County Register
Every finance column, including ours, seems to have a year-end list of tasks to complete in December.
But when you do all the shopping, decorating, and entertainment on top of your usual work and household responsibilities, does your end-of-year plate really need more? has never felt more cheerful and busy. Want to put the festival aside to work on more plans?
What if you paused the finance and tax tasks and postponed the tasks until next year? What are the consequences of ignoring the list and enjoying your vacation? What’s the worst thing that could happen?
After all, some of these to-do list items may not apply to your situation. There may be some rule changes that make the old year-end planning moves obsolete. I’ll do a quick analysis here and hopefully it will save me time and effort over the next few weeks.
estimated tax
First, do I need to make an estimated tax payment by the end of the year?
In fact, the deadline for the estimated tax payment is January 15th.
Also, if you earn a salary or wages, have tax withholding, and have no other significant source of income, you probably don’t need to pay estimated tax.
Many clients have historically accelerated tax credits, which is why they pay the state’s estimated tax in December. But his $10,000 HIS SALT limit on state and local tax deductions enacted in 2018 prevented most people from having to pay ahead of schedule.
If you have paid your estimated tax in the past, or if your income increased significantly in 2022, the withholding and estimated amount will account for 100% of your tax liability as shown on your 2021 tax return. As long as it is above, you may not need to pay. .
If you’re still unsure, send your tax professional a payslip with a list of quotes you paid after your vacation.
retirement plan contributions
Do I need to make additional contributions to my retirement plan before the end of the year?
Employee contributions to the 401k plan actually expire by December 31st. However, matching contributions by employers and contributions to other plans such as Solo 401ks and various IRAs do not expire until the 2023 tax filing deadline, including extensions.
While it’s generally wise to maximize your giving, donating extra money to your 401k at the last minute can actually cost you in the long run.
For example, if the tax rate is as low as 12%, the tax savings may not be significant.
If you don’t have enough savings on a regular basis for emergencies, you may need the funds currently contributed in the future, and you will have to withdraw from the plan and pay taxes and penalties upon withdrawal. Make sure your retirement contributions fit into your overall financial plan.
Minimum number of distributions required
What happens if I don’t take my RMD by the end of the year?
ONLY IF YOU’RE 72+ DO NOT IGNORE THIS TASK.
If you reach the age of 70½ after 2020, you must obtain your first RMD by April 1st of the year following your 72nd birthday. At that age, if you haven’t received a notice or phone call from your financial advisor, you should pass the RMD. call. They will calculate the required amount.
According to the IRS, if an account holder fails to withdraw RMD, fails to withdraw RMD in full, or fails to withdraw RMD by the applicable deadline, the amount not withdrawn will be taxed at 50%. will be
property tax
Are you worried about gift tax and inheritance tax at the end of the year?
Surprisingly, 99.8% of Americans won’t have to pay estate taxes when they die, so most people can ignore some or all of the year-end estate tax planning advice. (However, wealth planning for other reasons is still essential.)
Buying gifts for young adult family members can be very difficult, so if your finances allow it, it’s a good idea to give gifts in cash. It doesn’t matter if the gift is made this year or next, as the gift is non-deductible for the giver and not taxable to the recipient.
If you make a gift in 2022, you do not need to file a gift tax return unless the gift exceeds $16,000 per recipient ($32,000 if gifted with spouse).
A gift of $16,000 can help young people pay off credit cards, student loans, or pay a down payment on a home. If you donate a large amount of money, you must file a gift tax return, but if you do not file a personal income tax return, you will not be able to pay it.
Charitable Donations and Gifts
Do I need to make an additional charitable donation by December 31st?
Most taxpayers (90%) do not list deductions on their tax returns and cannot claim deductions for charitable donations. The $300 deduction for unitemized taxpayer charitable contributions will no longer be available in 2022. So if you want to donate but don’t itemize it, it’s fine to postpone until next year. If you’re not sure whether to itemize, look for Schedule A on your last year’s tax return, or ask a tax professional.
As the example shows, if your income and expenses are stable year after year and you’re not among the top 0.2% of the country’s richest people, you probably won’t have much to do at the end of the year. If you have any questions, we look forward to your call as our specialists may be available within the next two weeks. Still, you probably need to give them a break, too.
A popular meme has been circulating about Will Farrell, the star of the holiday classic comedy movie Elf. Enjoying his drink, he remarks: Sounds like a 2023 problem. ”Enjoy the holidays with your loved ones.
Michelle C. Herting, CPA, ABV, AEP specializes in tax planning, trust administration and business valuation.
https://www.ocregister.com/2022/12/18/what-happens-if-i-skip-financial-year-end-planning/ What Happens If You Skip Fiscal Year End Planning? – Orange County Register