Financial preparation for year-end


While it’s hard to believe, 2018 will be over almost as quickly as it began. With the end of the year rapidly approaching, it is not too late to make final decisions regarding 2018 finances. Businesses, as well as individuals, should make sure they are prepared to enter 2019 on their best footing by capitalizing on opportunities to turn their hard work into major payoffs.

Individual considerations

For individuals, maximizing retirement contributions should be at the top of the year-end checklist. To boost retirement savings, 401(k) contributions should be made prior to Dec. 31. Contributions to IRAs for the 2018 tax year can be made as late as April 15, 2019.

Keeping tabs on funds remaining in Section 125 Cafeteria Plans also is key. These employer-sponsored benefit plans allow employees to pay for certain qualified medical expenses — such as eyeglasses and contact lenses — on a pre-tax basis. These are “use-it-or-lose-it” funds, meaning unused funds will be lost at the end of the year.

As always, the end of the year is an ideal time for charitable giving. Taking a minimum distribution from a retirement plan and donating it directly to charity maximizes the overall tax benefit of charitable donations. This is especially effective for individuals who are no longer receiving a benefit from itemizing due to 2018 tax law changes. 

Maybe you had a banner year and are thinking about giving in a big way, but you have not decided which charity should receive a donation. Individuals thinking about this can establish a donor-advised fund, which functions like a charitable investment savings account. Contributions of cash, securities or other assets to a donor-advised fund generally qualify for an immediate tax deduction, giving individuals time to determine which charities to support.

Final individual decisions to make before the end of the year include balancing stock portfolios, harvesting capital losses to counter capital gains, or even donating to a 529 plan to build up savings for children or grandchildren.

Financial advisers can provide great insight into utilizing and balancing tax benefits with long-term plans. Even though the end of the year is approaching quickly, there still is time to contact a financial adviser to find options catered to your specific financial goals before the ball drops. Keep in mind you do not have to be wealthy to have a financial adviser, and many of these key decisions are best made with a trusted adviser by your side.

Business considerations

For businesses, there are a few key takeaways to consider before the end of the year. New tax laws for 2018 allow immediate expensing of equipment purchases placed in service before year-end. Although there are a few nuances in this new law — the overall impact is business friendly. For companies wanting to make capital improvements, purchase equipment or make other investments, the last quarter of 2018 may be the perfect time to maximize benefits.

Now is also the time for businesses to determine what method of accounting will be the most beneficial for 2018 and beyond. Businesses with under $25 million of revenue may find it beneficial to move to a cash basis method of accounting. The cash basis method of accounting allows businesses to wait to recognize taxable income until payments are received rather than when they are billed. This can facilitate better planning and savings for smaller organizations.

Tax planning should include what is best for you today — and in the future. Even before the new year begins, decisions can be made that may impact finances for the year ahead.

Laura Steenwyk is principal at Rehmann, where she provides strategic tax compliance, reporting and business planning services to clients in multiple industries, including construction, manufacturing, and real estate brokerage and development.

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