The end of the year is fast approaching, so here’s our “heads up” reminders for taking care of your income tax issues.
- Donations – With the huge increase in the standard deduction, most taxpayers are no longer itemizing deductions. If you still are itemizing: Clean out your closets and get those bags to Salvation Army or Goodwill. Buy/donate toys to Goodwill, Toys for Tots, Salvation Army, or another recognized charity. Write checks to the charities near your heart. Whatever you do, KEEP THE RECEIPTS! Charitable donations have become a favorite audit item at IRS.
- Flex-Spending Accounts – USE IT OR LOSE IT! Although the rules have loosened a bit with the new tax law, you still have to use up most of the money set aside from your paycheck for child care or medical expenses by the end of the year. The new tax rules give you the ability to roll-over $500 to your 2020 plan, but spend the rest or lose those set aside dollars.
- Capital Gains – The stock market has gone crazy this year! What a wonderful thing, but if you have profits to report for 2019, now is the time to get rid of a few losers. The reverse is also true: if you took a loss on shares earlier in the year, December is a great time to sell a couple of winners and offset the losses. Remember that you are limited to a maximum of $3,000 of capital loss in any one year, so if you had a stock that lost you $5,000, you can claim only $3,000 this year and have to carry the balance to next year’s return unless you also had a winner or two to reduce the loss.
- Self Employed – Businesses can invest up to $1 million in new equipment and write it all off in the year the equipment was bought AND PUT INTO SERVICE, so if you are going to buy that new piece of machinery before December 31, make sure you put it to business use by December 31. If you buy it and it gets delivered on January 2, it won’t help you on your 2019 tax return.
- Gifting – The annual gift tax limit for 2019 is $15,000 per person. If you and his Mom gave your son a car for graduation last May, I hope it cost less than $30,000!
- Required Minimum Distributions – Once you reach the age of 70 1/2, you are required to take a taxable distribution from your retirement accounts. Here’s a tax-saving tip for this year (or next): You can send up to $100,000 of the required distribution directly to a charity. It can’t touch your hands or it becomes taxable. You should instruct your retirement account manager to “send an RMD distribution directly to (whichever) charity” and it will count as part of your required withdrawal and isn’t taxable to you. And as always, KEEP A RECEIPT.
PLEASE be mindful: The IRS will never contact you by phone or by email. THOSE CALLS AND EMAILS ARE SCAMS! There wouldn’t be so many of them if they weren’t successful. Guard your social security # and your bank account # as if it were gold, because it is. Ask for a phone number to call them back and then call us (we know all the IRS phone numbers). If they start threatening, hang up! You don’t have to listen to that. You don’t have to get upset. You’ve got a friend in the Tax business!
As always, please feel free to call or email us if you have any tax related questions before tax season.