Year's end a good time to clean up financial loose ends
By Michelle Singletary
If you've got some time between now and your New Year's Eve celebrations, try to focus a little on the financial issues that need to be taken care of before the ball drops.
It's hard to believe a year has gone by. Seems like just yesterday that my husband and I were popping the top on some sparkling cider to celebrate the beginning of 2004. And now here we are, rushing to meet with our accountant and financial adviser.
What about you? Any financial matters you need to take care of before the end of the year? Can't think of any? Well, let me help.
Year-end tax tips:
• Property taxes — In order to boost your deductions, consider paying both real estate tax installments this year or making your last state estimated tax payment in December instead of waiting until Jan. 15, says Fred Grant, a certified public accountant and director of tax content for TaxNet, an online tax preparation service.
• IRA — Don't forget to take your required minimum distributions from your IRA, Grant also says. People over 70 1/2 years of age must take a certain minimum payout from their traditional IRA by Dec. 31 of each year or face a steep penalty. The IRS can impose a 50 percent penalty on the amount you should have withdrawn. Use the table in IRS Publication 590 to figure the minimum amount required. Just so you know, if you turned 70 1/2 this year, you don't have to take a distribution until April 1, 2005.
• 401(k) — If you haven't contributed the maximum to your tax-deferred 401(k) retirement savings account, do it before the end of the year, recommends the Illinois CPA Society.
• Records — The Illinois CPA Society also recommends you organize your tax records now before the end of the year. Why? It gives you time to request copies of any missing documents and makes it less likely that you will miss valuable deductions when you file your 2004 tax return.
For more information on year-end tax planning tips you should read "31 Tax Tips in 31 Days," a guideline prepared by the Ohio Society of CPAs. The series began Dec. 1 and concludes on Dec. 31, and can be found on the society's Web site at www.ohioscpa.com. Click on the link for "visitors."
Year-end money management tips:
• Debt — A number of surveys find that one of the top New Year's resolutions people make is to get out of debt. But how are you going to do that without a plan? "Make a plan, not a promise," recommends MDRT, an international association of financial professionals. By mapping out a financial plan, instead of listing each resolution, you'll have a tangible tool to make your goals a reality, the group says. To begin that plan you should compile all your bills and credit card statements. And if you need tips on how to accomplish this goal, pick up a copy of "Pay It Down!," the December selection for the Color of Money Book Club.
• Clean up — The end of the year is a good time to get rid of documents you don't need anymore. For example, up until now you should have been holding on to your quarterly statements from your 401(k) or other retirement plans. But once you get the annual summary, if everything matches up, then shred and throw away the quarterly statements, recommends Bankrate.com.
Reach Michelle Singletary at The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071 or singletarym@washpost.com.
