As the year winds down, a little planning can make a real difference on your tax bill. The last quarter is a smart time to review income, deductions, and contributions so you head into filing season prepared. Whether you file as an individual or you run a business, the steps below will help you finish the year with fewer surprises next spring.
Maximize Retirement Contributions
If you contribute to a workplace plan, confirm where you stand against this year's limits and adjust your final pay periods if needed. For those funding IRAs, set a target now and plan your cash flow so you can make the contribution on time. If you are 50 or older, remember that catch-up contributions can boost your tax-favored savings. Health Savings Accounts (HSAs) are another powerful option if you have an eligible high-deductible health plan. Contributions can reduce taxable income and help cover medical expenses now or in retirement.
Time Your Deductible Expenses Thoughtfully
If you itemize, consider whether it makes sense to "bunch" deductible expenses into this year or next. Examples include charitable gifts and certain medical costs. If you expect a higher income this year, accelerating qualified deductions before December 31 might help. If you expect a higher income next year, it may be better to wait. Keep receipts and acknowledgement letters for all charitable gifts and ensure the organizations are qualified.
Review Withholding and Estimated Taxes
If your income changed this year, run a quick checkup on withholding and estimated payments. Freelancers and business owners should confirm they're on track for the final quarterly deadline. A small top-up payment before year-end can help you avoid underpayment penalties and smooth cash flow in January.
Make Smart Business Moves Before December 31
Business owners can use the final quarter to align expenses and revenue with tax goals. Review planned equipment purchases, software subscriptions, and other business investments. Confirm that your bookkeeping is current and that you've categorized expenses correctly.
If your profits will be higher than expected, discuss timing strategies with a CPA to see whether it makes sense to place eligible assets in service before year-end. Also, check your payroll setup if you're an S-Corporation owner-operator to ensure reasonable compensation and distributions are in the right range.
Tie Up Loose Ends
- Revisit major life changes: marriage, divorce, or retirement can change your tax picture.
- Confirm beneficiary designations on retirement accounts and HSAs.
- Gather digital copies of receipts, 1099s, and charitable acknowledgements to streamline filing.
- If you take required minimum distributions, verify that you've met the amount due.
FAQs
Can I make IRA contributions after December 31?
Yes, you generally have until the federal tax filing deadline to make an IRA contribution for the prior year, but workplace plan contributions must occur through payroll before year-end.
Do I need to itemize to get a tax benefit from charitable giving?
Itemizers can deduct qualifying gifts, subject to AGI limits. If you take the standard deduction, you may not receive a direct tax benefit, but accurate records are still vital.
What if my income was uneven this year?
A tax projection can show whether to adjust withholding, make an estimated payment, or shift deductible expenses to reduce penalties and stabilize cash flow.
Get a Plan in Place Before December 15
Year-end planning works best with a clear picture of your income and financial goals. At Myrick CPA, we help individuals and business owners across the country review contributions, deductions, and timing decisions so you can finish the year strong. We work securely through our client portal and virtual meetings.
Schedule your year-end planning consultation before December 15 to lock in the steps that can help you minimize taxes and avoid last-minute stress.
