Date: December 27, 2013

A “To Do” List Before 2013 Ends

Don’t leave money on the table

In uncertain economic times, many employees put off contributions to retirement accounts, reasoning that they will make up lost ground when times improve.  Doing so, however, could result in leaving what is virtually “free” money on the table.  


If you have a 401(k) or comparable retirement account where your employer matches your contributions always contribute enough each year to receive your full employer match.  Not doing so leaves money on the table. Taking full advantage of an employer match is the best no-risk return you will ever find.  

Harvest Tax Losses

Analyze your holdings in taxable accounts and find positions that are currently in a loss, especially mutual funds and exchange traded funds (ETFs). Take the loss in 2013 and purchase a similar, but essentially different, investment to keep the spirit of the original investment going.


If you are over 70 ½…

You must take a required minimum distribution from your traditional IRA account(s) by year end. Failure to do so could result in a 50% excise tax on the amount required, but not actually withdrawn. If you turned 70½ during 2013, you have some flexibility. You could take your 2013 distribution by December 31st or you could delay it until April 1st of 2014.  If you opt for the latter, you still must make your 2014 distribution by December 31, 2014, resulting in two distributions during the calendar year. Every year thereafter, the distributions must be made by year-end.


Convert Traditional IRAs to a Roth IRA

If you are considering converting a Traditional IRA to a Roth IRA and will be paying taxes to convert, make that conversion in 2013 while you know exactly what your tax rate will be.


Establish self-employment retirement accounts

If you have self-employment income and are eligible to establish an Individual 401k plan or Roth 401k plan, those plans must be established by December 31st, although you will have until your tax deadline in 2014 to fund the account.


Make your gifts

You may think that your money is yours to give away as you please, but the federal government tends to look on excessive gifting as estate tax evasion. Currently you can gift up to $5 million ($10 million for couples) over your lifetime without incurring federal gift taxes of 35%. The maximum you can give one person each year without tax implications is $14,000 ($28,000 for couples.) This could change in the future, but for now, if you intend to make non-charitable monetary gifts, do so before year end.


Push deductions into 2014

If you expect to be paying higher income taxes in 2014, you might want to look at postponing paying deductible expenses to push them into next year.

Go Big

Buy your big ticket items like cars in 2013 to enjoy the potential sales tax deduction before it goes away. Congress could certainly reinstate or extend it, but you know what they say about a bird in the hand.


Talk to your tax adviser

It is particularly important to talk with your tax adviser and make certain your finances are set up to minimize the tax bite as much as possible. Paying your fair share shouldn’t mean overpaying.

Paul Schatz, President, Heritage Capital