By now you have probably been bombarded with "10 Ways to Reduce Taxes" and "15 Investment Moves to Make Now" advertisements. It is the end of the year, which means it is time to start thinking about taxes. However, this does not have to be a cumbersome process and usually all "10 steps" don't apply to everyone. Here are three key components of year-end tax planning to consider.
Charitable contributions
For a charitable contribution to count for 2014, the check needs to be written and/or mailed, and credit card companies must acknowledge a charge on your statement by December 31 or earlier. A good rule of thumb is to make sure you mail your check or ring up your credit card by the 28th to give the transaction the best chance of clearing by December 31.
Retirement plan distributions
Required Minimum Distributions (RMDs) from retirement plans must be made by December 31. If you are required to take an RMD and neglect to do so by December 31, you could be subject to penalties.
Investment vs. tax planning
Make sure to cross check your investment and tax planning with your investment advisor and your CPA. Your investment advisor might encourage you to harvest some capital gains with losses in your investment portfolio, but since only up to $3,000 in capital losses can be reported on your tax return each year, make sure to run your investment plans by your CPA. Also check any mutual fund holdings you have to see if they anticipate large capital gain distributions by year-end.