With only six weeks left of 2021, you have a little time to take advantage of any additional tax savings available to you. Consider these 6 tips to make sure you don’t miss out on any vital planning opportunities.
1. Check Your Paycheck Withholdings
If you are in a pattern of owing taxes when you file, make sure you have paid in at least 100% of what you owed in the prior year to avoid any penalties. This can apply to both federal and state taxes. If you would like to look a bit deeper, the IRS has a Tax Withholding Estimator that can help you determine if additional payments need to be made.
2. Make Additional 401(k) Contributions
Taxpayers can make up to $19,500 in tax deductible contributions for 2021. For taxpayers 50 years and older, you can make additional contributions of up to $6,500 in “catch-up” contributions.
3. Take or Schedule any Required Minimum Distributions (RMDs)
Taxpayers 72 years and older are required to take minimum distributions based on the size of their individual retirement account; failing to take these distributions subjects you to a 50% penalty. Verify that you received the correct RMDs for 2021 and take the time to schedule your RMDs for 2022.
If your RMD is more income then you feel you need, you have the choice to make a qualified charitable distribution of up to$100,000.
4. Make Charitable Contributions
Increased standard deductions have significantly reduced the number of taxpayers that are utilizing the itemized deduction. Review your itemized deductions and determine if additional charitable contributions could allow you to itemize for more tax savings.
5. Spend funds held in Flexible Spend Accounts (FSAs)
Any funds remaining in your FSA could be lost depending on your employer if they are not spent by December 31st. Schedule any last-minute doctors’ visits, prescription refills, or qualified purchases from retailers to utilize these funds. It would also be prudent to see if your employer allows any rollover to next year.
6. Schedule a Meeting with your Tax Advisor
Tax advisors will have completed 2020 filings and be preparing for the 2021 filings. Schedule a meeting now to review any questions or strategies you would like to discuss.
