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Your Annual Financial To Do List 2014

November 20, 2013

Things you can do before & for 2014.     
                

What financial, business or life priorities do you need to
address for 2014? Now is a good time to think about the investing, saving or
budgeting methods you could employ toward specific objectives. Some year-end
financial moves may prove crucial to the pursuit of those goals as well. 

What can you do to lower your 2013 taxes? Before the year
fades away, you have plenty of options. Here are a few that may prove
convenient:

*Make a charitable gift before New Year’s Day. You can claim the
deduction on your 2013 return, provided you use Schedule A. The paper trail is
important here. 

If you give cash, you need to document it. Even small
contributions need to be demonstrated by a bank record, payroll deduction
record, credit card statement, 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 in December but only end up gifting
$500 before 2013 ends, you can only deduct $500.
1

Are you gifting appreciated securities? If you have
owned them for more than a year, you will be in line to take a deduction for
100% of their fair market value and avoid capital gains tax that would have
resulted from simply selling the stock, fund or bond and then donating those
proceeds. (Of course, if your investment is a loser, then it might be better to
sell it and donate the money so you can claim a loss on the sale and deduct a
charitable contribution equivalent to the proceeds.)
2

Does the value of your gift exceed $250? It may, and
if you gift that amount or larger to a qualified charitable organization, you
will need a receipt or a detailed verification form from the charity. You also
have to file Form 8283 when your total deduction for non-cash contributions or property
in a year exceeds $500.
1 

If you aren’t sure if an organization is eligible to receive
charitable gifts, check it out
at  irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

*Contribute more to your retirement plan. If you haven’t
turned 70½ and you participate in a traditional (i.e., non-Roth) qualified
retirement plan or have a traditional IRA, you can reduce your 2013 taxable
income by the amount of your contribution. If you are self-employed and don’t
have a solo 401(k) or something similar, consider establishing and funding a
plan before the end of the year. Also, keep in mind that your 2013 tax year
contribution to an IRA or solo 401(k) may be made as late as April 15, 2014 (or
October 15, 2014 if you file Form 4868). For 2013, you can contribute up to
$17,500 in a 401(k), 403(b) or profit-sharing plan, with a $5,500 catch-up
contribution also allowed if you are age 50 or older.
3,4

*Make a capital purchase. If you buy assets
for your business that have a useful life of more than one year – a truck, a
computer, furniture, a rototiller, whatever – those purchases are commonly
characterized as capital expenses. For 2013, the Section 179 deduction can be
as much as $500,000 (although it is ultimately limited to your net taxable
business income). First-year bonus depreciation is set at 50% for most
purchases of new equipment and software in 2013. It is uncertain if 2014
deductions will be as generous.
3

*Open an HSA. If you work for yourself or have a
very small business, you may pay for your own health coverage. If you set up
and fund a Health Savings Account in 2013, you can make fully deductible HSA
contributions of up to $3,250 (singles) or $6,450 (married couples). Catch-up
contributions of up to $1,000 are allowed for those 50 or older.
3

*Practice tax loss harvesting. You could sell
underperforming stocks in your portfolio – enough to rack up at least $3,000 in
capital losses. If it ends up that your total capital losses top all of your
capital gains this year, you can deduct up to $3,000 of capital losses from
this year’s taxable income. If you have over $3,000 in capital losses, the
excess rolls over into 2014.
2,3 

Are there other major moves that you should consider? Here are some
additional ideas with merit.

*Pay attention to asset location. Tax-efficient asset
location can be an ignored fundamental of investing. Broadly speaking, consider
placing your least tax-efficient securities in pre-tax accounts and your most
tax-efficient securities should be held in taxable accounts. 

*Can you contribute the maximum to your IRA on January 1? The rationale
behind this is that the sooner you make your contribution, the more interest
those assets will earn. If you haven’t made your 2013 IRA contribution, you
still have until April 15, 2014 to do that.
3

In 2013 you can contribute up to $5,500 to a Roth or traditional
IRA if you are age 49 or younger, and up to $6,500 if you are age 50 and older
(though your MAGI may affect how much you can put into a Roth IRA).
5  

What are the income limits on tax deductions for traditional IRA
contributions? If you participate in a workplace retirement plan, the 2013 MAGI
phase-out ranges are $59,000-69,000 for singles and heads of households,
$95,000-115,000 for married couples filing jointly when the spouse making IRA
contributions is covered by a workplace retirement plan, and $178,000-188,000
for an IRA contributor who is not covered by a workplace retirement plan but is
married to someone who is.
4,5

*Should you go Roth before 2014 gets here? If you are a high
earner, remember that the planned 3.8% Medicare surtax affecting single/joint
filers with AGIs over $200,000/$250,000 will not apply to qualified payouts
from Roth accounts.
6 

MAGI phase-out limits affect Roth IRA contributions. For 2013,
phase-outs kick in at $178,000 for joint filers and $112,000 for single filers.
Should your MAGI prevent you from contributing to a Roth IRA at all, you still
have a chance to contribute to a traditional IRA in 2013 and then roll those
assets over into a Roth.
4,6

Consult a tax or financial professional before you make any IRA
moves to see how it may affect your overall financial picture. If you have a
large traditional IRA, the projected tax resulting from the conversion may make
you think twice.

What else should you consider as 2013 turns into 2014? There are some
other important things to note…

*Review your withholding status. Should it be
adjusted due to any of the following factors? 

>> You tend to pay a great deal of income tax each year.

>> You tend to get a big federal tax refund each year.

>> You recently married or divorced.

>> A family member recently passed away.

>> You have a new job at a much greater salary.

>> You started a business venture or became
self-employed. 

*If you are retired and older than 70½, remember your RMD. Retirees over age
70½ must begin taking Required Minimum Distributions from traditional IRAs, and
Roth 401(k)s and all employer-sponsored retirement plans by December 31. The
IRS penalty for failing to take an RMD equals 50% of the RMD amount.
7

Your first RMD will be different, though. If you have turned or
will turn 70½ in 2013, you can postpone your first IRA RMD until April 1, 2014.
The downside of that is that you will have to take two IRA RMDs next year, both
taxable events – you will have to make your 2013 tax year withdrawal by April
1, 2014 and your 2014 tax year withdrawal by December 31, 2014.
7  

Plan your RMDs wisely. If you do so, you may end up limiting or
avoiding possible taxes on your Social Security income. Some Social Security
recipients don’t know about the “provisional income” rule – if your modified
AGI plus 50% of your Social Security benefits surpasses a certain level, then a
portion of your Social Security benefits become taxable. For tax year 2013,
Social Security benefits start to be taxed at provisional income levels of
$32,000 for joint filers and $25,000 for single filers.
8 

*Consider the tax impact of any 2013 transactions. Did you sell real
property this year – or do you plan to before 2013 ends? Did you start a
business? Are you thinking about exercising a stock option? Could any large
commissions or bonuses come your way before January? Did you sell an investment
held outside of a tax-deferred account? Any of this might significantly affect
your 2013 taxes.

*Would it be worth making a 13th mortgage payment this
year? 
If your house is underwater, there’s no sense in doing it – and
you could also argue that the dollars might be better off invested or put in
your emergency fund. Those factors aside, however, there may be some merit to
making a January mortgage payment in December. If you have a fixed-rate loan, a
lump sum payment can reduce the principal and the total interest paid on it by
that much more.

*Are you marrying in 2014? If so, why not
review the beneficiaries of your workplace retirement plan account, your IRA,
and other assets? In light of your marriage, you may want to make changes to
the relevant beneficiary forms. The same goes for your insurance coverage. If you
will have a new last name in 2014, you will need a new Social Security card.
Additionally, you and your spouse no doubt have individually particular
retirement saving and investment strategies. Will they need to be revised or
adjusted with marriage?

*Are you coming home from active duty? If so, go ahead and
check the status of your credit, and the state of any tax and legal proceedings
that might have been preempted by your orders. Make sure your employee health
insurance is still there, and revoke any power of attorney you may have granted
to another person.   

Talk with a qualified financial or tax professional today. Vow
to focus on being healthy and wealthy in the New Year.
    

This material was
prepared by MarketingLibrary.Net Inc., and does not necessarily represent the
views of the presenting party, nor their affiliates. All information is
believed to be from reliable sources; however we make no representation as to
its completeness or accuracy. Please note – investing involves risk, and past
performance is no guarantee of future results. The publisher is not engaged in
rendering legal, accounting or other professional services. If assistance is
needed, the reader is advised to engage the services of a competent
professional. This information should not be construed as investment, tax or
legal advice and may not be relied on for the purpose of avoiding any Federal
tax penalty. This is neither a solicitation nor recommendation to purchase or
sell any investment or insurance product or service, and should not be relied
upon as such. All indices are unmanaged and are not illustrative of any
particular investment.
  

Citations.

1 –
irs.gov/uac/Nine-Tips-for-Charitable-Taxpayers [5/16/13]

2 –
kiplinger.com/article/taxes/T052-C005-S001-charities-give-stocks-instead.html
[12/27/12]

3 –
nolo.com/legal-encyclopedia/five-things-business-owners-can-before-december-31-lower-their-taxes.html
[12/12]

4
– irs.gov/uac/2013-Pension-Plan-Limitations [10/18/12]

5 –
kiplinger.com/article/retirement/T047-C001-S001-2013-retirement-account-contribution-limits.html
[10/23/12]

6 –
online.wsj.com/article/SB10001424052702304072004577325551162426954.html
[10/11/12]

7 –
irs.gov/Retirement-Plans/RMD-Comparison-Chart-%28IRAs-vs.-Defined-Contribution-Plans%29
[4/16/13]

8 –
socialsecurity.gov/planners/taxes.htm [10/18/12]

This material was prepared by Peter Montoya Inc, and does not necessarily represent
the views of The Retirement Group or FSC Financial Corp.
This information should not be construed as investment advice. Neither the
named Representatives nor Broker/Dealer gives tax or legal advice. All
information is believed to be from reliable sources; however, we make no
representation as to its completeness or accuracy. The publisher is not engaged
in rendering legal, accounting or other professional services. If other expert
assistance is needed, the reader is advised to engage the services of a
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