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Episode 101: End-of-Year Financial Planning

David Dickens • Nov 19, 2020

Today’s Prep:

2020 is coming to the end. What financial decisions and tax moves do you need to make before it’s over?

Equipping Points:

A lot has happened this year, particularly in the past few weeks. As 2021 approaches, how do we need to prepare? What’s significant about changing from one year to the next? What financial moves do you need to make now?


David talks about three things that have a deadline to do by the end of the year. Based on a popular previous blog post, End-of-Year Money Moves, we talk about what you should be doing before December 31.


Often, we talk about tax-loss harvesting, but this year also includes long-term capital gain harvesting. What tax moves do you need to make in your taxable investment account? Did you take losses in your portfolio? Then, consider what the tax rates might be under Biden’s plan were it to pass.


As gift-giving holidays approach, you might be planning to give a loved on a big check. What is the gift tax? What kind of money can you give without having to report it? What forms do you need to file with the IRS?



Have you made a Roth conversion yet this year? Remember that the deadline is the end of the year. What is a Roth conversion? When and why should you do one? David shares a few client examples of what a Roth conversion could look like.


Ready to be done with 2020? Finish off what you need to when it comes to your financial plan for the year and then let’s send 2020 on its way. Here’s to a better and more stable 2021!

Today’s Takeaway:

“If you’ve been super successful over your life and you want to give away some money, there’s a number of different ways you can do it without paying any gift tax.”


– David Dickens

KC Financial Advisors Blog

14 Mar, 2024
Things You Can Do for Your Future as the Year Unfolds What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to considering an estate strategy. You have plenty of choices. Remember that this article is for informational purposes only and not a replacement for real-life advice. The tax treatment of assets earmarked for retirement can change, and there is no guarantee that the tax landscape will remain the same in years ahead. A financial or tax professional can provide up-to-date guidance. Here are a few ideas to consider: Can you contribute more to your retirement plans this year? In 2024, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $7,000 ($8,000 for those making "catch-up" contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation. Income limits are one factor in determining if a traditional IRA contribution is tax-deductible. 1 Once you reach age 73, you must take the required minimum distributions from a traditional IRA. The I.R.S. taxes withdrawals as ordinary income, and if taken before age 59½, they may be subject to a 10% federal income tax penalty. Roth 401(k)s offer their investors a tax-free and penalty-free withdrawal of earnings. Qualifying distributions must meet a five-year holding requirement and occur after age 59½. Such a withdrawal also qualifies under certain other circumstances, such as the owner's passing. Employer match is pretax and not distributed tax-free during retirement. The original Roth IRA owner is not required to take minimum annual withdrawals. Make a charitable gift. You may be able to claim the deduction on your tax return, provided you follow the Internal Review Service guidelines. The paper trail can be important here. If you give cash, you should consider documenting it. A bank record can demonstrate some contributions, payroll deduction records, credit card statements, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you may be able to only deduct $500. 2 Consult your tax, legal, or accounting professional before modifying your record-keeping approach or strategy for making charitable gifts. See if you can take a home office deduction for your small business. You may want to investigate this if you are a small business owner. You might be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves complex tax rules and regulations. Before moving forward, consider working with a professional familiar with the tax rules related to home-based businesses. Open an HSA. A Health Savings Account (HSA) works like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $4,150 contribution for 2024 if you are single; and $8,300 if you have a spouse or family. Those limits jump by a $1,000 "catch-up" limit for each person in the household over age 55. 3 If you spend your HSA funds for non-medical expenses before age 65, you may need to pay ordinary income tax and a 20% penalty. After age 65, you may need to pay ordinary income taxes on HSA funds used for non-medical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states. Pay attention to asset location. Asset location is one factor to consider when creating an investment strategy. Asset location is different from asset allocation, which is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Review your withholding status. Should it be adjusted due to any of the following factors? ● You tend to pay the federal or state government at the end of each year. ● You tend to get a federal tax refund each year. ● You recently married or divorced. ● You have a new job with adjusted earnings. Consider consulting your tax, human resources, or accounting professional before modifying your withholding status. Did you get married in 2023? If so, it may be time to review the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2024, you should get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted. Are you coming home from active duty? If so, go ahead and check on the status of your credit. Check on any other orders that you might have preempted, too. Consider the impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2024? Do you anticipate selling an investment held outside of a tax-deferred account? Vow to focus on your overall health and practice sound financial habits in 2024. And don't be afraid to ask for guidance from a professional who understands your situation. Sources: 1. TheFinanceBuff.com, August 10, 2023 2. IRS.gov, June 5, 2023 3. IRS.gov, September 5, 2023
14 Mar, 2024
What financial questions are every generation asking? Over the course of this three-part series, there will be something for everyone! Today, we’ll focus on six common financial questions Baby Boomers are asking.
By Alexandria Washington 15 Feb, 2024
Equipping Points:
03 Feb, 2024
Who among us wants to pay the IRS more taxes than we have to? While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the five most overlooked opportunities to manage your tax bill. Reinvested Dividends : When your mutual fund pays you a dividend or capital gains distribution, that income is a taxable event (unless the fund is held in a tax-deferred account, like an IRA). If you’re like most fund owners, you reinvest these payments in additional shares of the fund. The tax trap lurks when you sell your mutual fund. If you fail to add the reinvested amounts back into the investment’s cost basis, it can result in double taxation of those dividends. 1 Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money. Out-of-Pocket Charity : It’s not just cash donations that are deductible. If you donate goods or use your personal car for charitable work, these are potential tax deductions. Just be sure to get a receipt for any amount over $250. 2 State Taxes : Did you owe state taxes when you filed your previous year’s tax returns? If you did, don’t forget to include this payment as a tax deduction on your current year’s tax return. There is currently a $10,000 cap on the state and local tax deduction. 3 Medicare Premiums: You may be able to deduct unreimbursed medical and dental premiums, co-payments, deductibles, and other medical expenses to the extent that the costs exceed 7.5% of your adjusted gross income. This includes most Medicare premiums. 4 Income in Respect of a Decedent: If you’ve inherited an IRA or pension, you may be able to deduct any estate tax paid by the IRA owner from the taxes due on the withdrawals you take from the inherited account. 5 1. Investopedia.com, January 11, 2024 2. IRS.gov, 2024 3. IRS.gov, 2024 4. IRS.gov, 2024 5. IRS.gov, 2024. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
02 Feb, 2024
Diving into the mailbag, David answers three questions about Social Security, 401(k) savings, and bad debt. Whether you are full retirement age, like Jacob who asks when to begin taking Social Security, or you are in your working years like Anna who is saving away in her 401(k), you’re sure to learn something from today’s show.
18 Jan, 2024
Life insurance isn’t a fun topic to talk about, but it’s an important one. We talk through three reasons you should use life insurance and how to have a life insurance strategy in place--as soon as this week. Remember, with life insurance, you’re trying to protect against an unforeseen financial event.
04 Jan, 2024
For our first podcast of the new year, we are covering five things you can take care of this month to get your year off on the right track. Whether you have big financial plans for the year or simple financial tweaks, each of these five things are important and doable in January.
27 Dec, 2023
How to Prepare for Tax Season This guide will explore how tax filing may look different this tax year and what you can do to prepare. Remember that this guide is for informational purposes only and is not a replacement for real-life advice, so consult your tax, legal, and accounting professionals before modifying your strategy. The Tax Brackets The tax brackets are: 10, 12, 22, 24, 32, 35, and 37 percent. Here are the tax brackets and the corresponding income ranges: 1 These modest changes to the tax brackets also mean that wage earners may fall into lower brackets this tax year. Here is one example: A single filer at $95,000 in taxable income would have fallen into the 24 percent bracket for tax year 2022. The filer would now be in the 22 percent tax bracket for 2023. These new rates will likely expire in 2025 unless Congress acts to make them permanent. Exemptions also changed under the new tax code. Remember that the tax brackets represent how much you will pay for each portion of your income. For example, if you make $125,000 for the 2023 tax year and are married filing jointly, you would pay 10 percent on the first $22,000, 12 percent on the next $67,450, and 22 percent on the final $35,550. You would not pay 22 percent for the entire $125,000 of your annual income. IMPORTANT DEADLINES JANUARY 16, 2024 If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, postmark this payment by January 16, 2024. APRIL 15, 2024 FIRST QUARTER 2024 ESTIMATED TAX PAYMENT DUE 2023 INDIVIDUAL TAX RETURNS DUE Most taxpayers have until April 15 to file tax returns. Email or postmark your returns by midnight on this date. LAST DAY TO MAKE A 2023 IRA CONTRIBUTION If you have not already contributed fully to your retirement account for 2023, April 15 is your last chance to fund a traditional IRA or a Roth IRA. INDIVIDUAL TAX RETURN EXTENSION FORM DUE If you cannot file your taxes on time, file your request for an extension by April 15 to push your deadline back to October 15, 2024. JUNE 17, 2024 SECOND QUARTER 2024 ESTIMATED TAX PAYMENT DUE SEPTEMBER 16, 2024 THIRD QUARTER 2024 ESTIMATED TAX PAYMENT DUE OCTOBER 15, 2024 EXTENDED INDIVIDUAL TAX RETURNS DUE You have until October 15 to file your 2023 tax return if you received an extension. *Tax deadlines on weekends or national holidays will be delayed until the following business day. Also, the IRS can adjust federal tax deadlines on short notice based on its assessment of financial or economic conditions. **Extended due dates exist for residents of Maine and Massachusetts. Individuals who live in Maine and Massachusetts have until April 17, 2024, to file their 2023 Form 1040 because April 15, 2024 is Patriots' Day and April 16, 2024, is Emancipation Day. The Child Tax Credit The 2023 Child Tax Credit allows a credit of up to $2,000 per child for 2023. The credit is partially refundable and phases out at income thresholds of $200,000 (or $400,000 for married taxpayers filing jointly). 2 Preparing for the Tax Season Planning well before the tax season may help you better prepare for the unexpected. Here are several reasons to begin early: ● Your home, job, or relationships changed ● You need to start saving money if you may owe taxes ● You want to ensure you qualify for tax deductions You can make changes throughout the year to ensure your tax preparations go smoothly. In particular, you can periodically assess your paycheck withholdings to get a refund or reduce or eliminate your tax burden. You should track and store your tax and other financial records to avoid delays or frantic preparations as the filing deadline approaches. Records may include W-2 forms, canceled checks, certain receipts, and previous returns. Here is a list of other items to start gathering: ● Pay stubs ● Mortgage payment records ● Closing paperwork on home purchases ● Receipts for items or services you may want to claim as itemized deductions ● Records on charitable giving and donations ● Mileage logs on cars used for business ● Business travel receipts ● Credit card and bank statements to verify deductions ● Medical bills ● 1099-G forms for state and local taxes ● 1099 forms for dividends or other income During the first few months of 2024, ensure you receive your W-2 and 1099 forms and other tax documents. Leave adequate time to collect documents and prepare to file your taxes before the April 15, 2024 deadline. Tightening the Nuts and Bolts Here are some additional ways to prepare this year for next year’s tax season: Look at last year: Look at last year’s return. In the months ahead, you may still have the opportunity to contribute more to your retirement plan, which may lower your taxable income. Donate to charity: How about “bunching” your charitable donations? Bunching allows you to optimize your deduction allowances by making two or more years’ worth of charity donations in one year. Let us say you are married, expect to itemize your deductions, and anticipate making $15,000 in annual donations. By donating $30,000 in one year and skipping the next, you may be able to qualify for a higher deduction. 3 Review Capital Losses: Consider deducting capital losses if investing in the financial markets. You can claim deductions if you experience losses, but you can claim losses only if they exceed capital gains. You can claim the difference of up to $3,000 per year if you are married filing jointly or $1,500 if you are filing separate returns. Net losses that exceed $3,000 can carry over into future years. 4 Deductions for capital losses can only apply to investment property sales, not the sale of investment property held for personal use. Get organized: Find a place to store your tax documents until it is time to prepare to file. A sound record keeping system may alleviate concerns later as the deadline gets closer. If you store your documents or prior returns on your computer, back them up on a thumb drive or other device or system in case your computer is hacked or stolen. Consider other taxes: Monitor local and state government requirements that may affect your tax situation. How Long? The IRS provides recommended timelines for retaining financial documents: 5 1. You should keep your tax records for three years if #4 and #5 below do not apply. 2. You should keep records for three years from the original filing date of your return or two years from the date you paid your taxes if you claimed a credit or refund after you filed your return. Select whichever is the later date. 3. You should keep your records for seven years if you claim a loss from worthless securities or a bad debt deduction. 4. You should keep your records for six years if you failed to report income that you should have and the payment was more than 25 percent of the gross income listed on your return. 5. Keep records indefinitely if you do not file a return. 6. You should keep employment tax records for at least four years after the due date or after you paid the taxes. Select whichever is later. This Special Report is not intended as a guide for the preparation of tax returns. The information contained herein is general in nature and is not intended to be, and should not be construed as, legal, accounting or tax advice or opinion. No information herein was intended or written to be used by readers for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Readers are cautioned that this material may not be applicable to, or suitable for, their specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. Readers are encouraged to consult with professional advisors for advice concerning specific matters before making any decision. This material was prepared by FMG, and the information given has been derived from sources believed to be accurate. This is not intended as a guide for the preparation of tax returns, nor should it be construed as legal, accounting or tax advice. This information is subject to legislative changes and is offered “as is”, without warranty of any kind. Publisher and provider assume no obligation to inform readers of any changes in tax laws or other factors that could affect the information contained herein. Citations. 1. IRS.gov, 2023 2. IRS.gov, 2023 3. IRS.gov, 2023 4. IRS.gov, 2023 5. IRS.gov, 2023
21 Dec, 2023
Because David loves listener questions so much, we wanted to end the year with a few more! For starters, Amy says she has never been in a hurry to pay off debt, never paid extra on her mortgage, uses a HELOC, doesn’t pay cash for cars, and doesn’t see a problem with it. Using debt has allowed her to use money for other things, including saving for retirement. Is that okay?
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