NEW YORK (MainStreet) — Tax season isn't as far away as you might think. Uncle Sam doesn't just set an April 15 deadline for filing taxes and leave it at that.
No way. The federal government also offers a litany of other deadlines, chief among them the Dec. 31 deadline for documenting and finalizing year-end tax breaks.
"You've got to take action quickly," says Peter Mallouk, a Kansas City, Mo., financial planner and the author of The Five Mistakes Every Investor Makes and How To Avoid Them. "Many of these opportunities expire along with 2014, so don't neglect year-end financial planning among the holiday hustle and bustle."
Mallouk has a few well-timed end-of-the-year tax planning tips:
Address your retirement. Start with your retirement plan, Mallouk says. "Make sure you have taken advantage of your employer's 401(k) plan. If you aren't on track to max it out, you can adjust for the last few paychecks of the year, or use a year-end bonus to make up the difference."
Address your charitable giving. Make sure you have made your charitable gifts by Dec. 31 to deduct them on this year's return, he adds. "These
gifts can be in the form of cash, securities or even household goods."
Prepay taxes and save money. If you think this will be a high-income year compared with next year, consider prepaying your January mortgage payment, real estate taxes and fourth-quarter state estimated payments, Mallouk advises. "Be wary of the alternative minimum tax, though, as that may disallow some of those deductions."
Fund your children's and grandchildren's 529 plans. "Many states offer a tax break for the contribution, and the tax-free growth can help even a small contribution grow over time," Mallouk says.
Flex your financial muscles. "Make sure you have spent your flex spending account funds by year-end, as many plans only allow up to $500 to be carried over to next year," he adds. Check with your employer for the full details.
Self-employed? Start making moves now. "Self-employed individuals will want to make sure they have made appropriate estimated payments, as well as started to round up their deductible expenses like mileage, telephone, Internet and travel costs," Mallouk says.
— By Brian O'Connell for MainStreet