Deadline nears for year-end financial strategy
by Matt Shinall
Dec 28, 2011 | 1414 views | 0 0 comments | 7 7 recommendations | email to a friend | print
Susan Simonton
Susan Simonton
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As resolutions and midnight toasts near, so do deadlines for 2011 tax advantages and financial strategy.

With only a few days left in the year, little time remains for long-term planning to be made but last-minute action can be taken to maximize current strategies.

"It's hard because there's very few days left, most things need to be done by Dec. 31 and since the 31st is on a Saturday, most things actually need to be done by the 30th," said Susan Simonton of Simonton Financial Associates. "At this point in the year, you probably know what your income is for the year, and if you are close to a tax bracket and you can do anything that will give you an extra deduction, it could drop you let's say from a 28 percent tax bracket to a 25 percent tax bracket. So it doesn't just save you on that item, it could save you 3 percent on everything else that you're paying."

Touching on several issues, including 401Ks and Individual Retirement Accounts, Simonton asks questions to remind her clients to take advantage of opportunities before the new year.

"If you have a 401K at work, have you maximized the match from your employer? Have you made the maximum contribution for the year? And it may be too late, that depends on if your employer will let you put some extra in there," she said. "On traditional IRAs or Roth IRAs you actually have until April 15 for 2011, so you have some extra time there. But you'd want to try to maximize your contribution there. ... Look to see if maybe converting some of your traditional IRA money to Roth would make sense, and if you do it this year, that would need to be done by the 30th.

"If you are self-employed and don't have a retirement plan, you can get one opened by the 30th and still have until April 15th to make your contributions."

Although it may be difficult to see a doctor on short notice, health benefits operating on a January to December calendar will often expire whether they are used or not.

"Assume that if your employer's benefits are on a January-to-December calendar, and most are but not all, look at whether or not you've met your medical deductible for the year. If you've met it, any other work that needs to be done -- if you can get it done between now and the 30th -- you should. And if you have not met your deductible, try to hold off and not do anything before Jan. 1 so that it counts for next year," Simonton said. "If you have a health savings account, you need to make your contributions for the year by Dec. 30. ... And if you have a flexible spending account, you need to spend it by Dec. 30. I've known people who have bought a year's worth of contact lens solution just to make sure they used up what was left in that account. If you don't use it, you lose it."

For investors, Simonton warns of future increases in the capital gains tax. While an extension was approved through 2012, future increases would warrant a look at harvesting gains. Investors should also take the time to reassess and balance their portfolio.

Lastly, Simonton suggests looking at deductions to be made at year's end through charitable giving or business investment.

"Look at making charitable donations -- cash, it can be stocks, mutual funds. It can be non-cash, like clothing. Make sure you keep a receipt of what you give," she said. "You can also this year still give up to $100,000 to charity without any tax consequence. That's especially nice for somebody that's over 70 and a half having to take required minimum distributions but don't need the money."

For business owners, inevitable expenses may be beneficial if made early. Some equipment expenditures may even by made strategically if it can be done before Dec. 30.

"There are expenses you could prepay so that you could use as a tax write-off this year. You could pay your quarterly estimated tax payments that are due Jan. 16. If you pay them by Dec. 30, it'll count in this year's tax," Simonton said. "Business expenses, if you've been looking to buy a new desk or computer for the office, get it in now and count it on this year's tax return. Rental expenses, need to fix up a rental property, anything you get paid by Dec. 30 will count on this year's tax return."