As the calendar year draws to a close, it is easy for tax matters to get pushed aside by holiday schedules and other priorities. Still, the final months of the year can be an ideal time to review your financial picture and identify tax planning choices that may no longer be available after December 31.

A few timely decisions can help reduce uncertainty at filing time, limit the risk of an unexpected balance due, and support your broader financial goals. Whether your income, family situation, or investments changed this year, a year-end review can help you enter the new year feeling more prepared.

Check Your Withholding and Estimated Payments

Start by looking at whether your income tax withholding reflects your current circumstances. Changes such as a new position, a pay increase, retirement, investment earnings, self-employment income, or changes in your household can all affect the amount of tax you may ultimately owe.

When too little is withheld from paychecks, you could face a larger tax bill when you file. On the other hand, excessive withholding means more of your money has been paid to the government throughout the year than may have been necessary.

It is also important to revisit estimated tax payments if you receive income without regular withholding. This may include income from self-employment, rental property, investments, or retirement accounts. A review before year-end can help determine whether an additional payment is appropriate before the year closes or ahead of the final estimated-payment due date, potentially helping you avoid a balance due and possible penalties.

Review Retirement Plan Contributions

Year-end is a practical time to take stock of your retirement planning progress. Contributions to employer-sponsored plans, including 401(k) and 403(b) accounts, generally need to be processed through payroll before the end of the calendar year.

If you have room in your budget and have not yet reached the applicable contribution limit, increasing contributions during your remaining pay periods may help lower taxable income while adding to your retirement savings. It is also worth confirming that you are contributing enough to receive any employer match that may be available.

A Roth IRA conversion may also be worth evaluating for some taxpayers before year-end. A conversion commonly creates taxable income in the year it occurs, but qualified Roth IRA withdrawals may be tax-free in the future. Because the effect can vary significantly by individual circumstances, this decision deserves careful consideration as part of a larger tax planning and retirement planning discussion.

Use Available HSA and FSA Benefits

For individuals covered by a qualifying high-deductible health plan, a Health Savings Account, or HSA, may provide meaningful tax advantages. Eligible contributions may be deductible, account earnings can grow tax-deferred, and withdrawals used for qualified medical expenses are generally tax-free.

If you have not yet contributed the maximum allowable amount, review whether you still have time to add funds before the deadline. This can be a useful way to address health-related expenses while considering your overall tax situation.

Flexible Spending Accounts, or FSAs, deserve attention as well. Many plans operate under use-it-or-lose-it provisions, so money that remains unused may be forfeited after the plan’s permitted period. Since employer plans can have different rules, reviewing your remaining balance now can help you avoid leaving funds behind. Open enrollment can also be a helpful time to decide whether your FSA election continues to match your family’s needs.

Consider Investment and Income Timing

Reviewing investments before the end of the year can be an important part of coordinated investment management and tax planning. If certain investments have declined in value, tax-loss harvesting may be an option to consider. Realizing a loss by selling an investment may help offset capital gains, and excess losses may sometimes offset a limited amount of ordinary income.

This approach should not be used without considering your longer-term investment objectives. It is also important to understand IRS wash-sale rules, which can restrict a tax benefit when substantially similar investments are purchased again too quickly.

The final weeks of the year may also be a good time to review the timing of income and deductible expenses. Depending on your circumstances, accelerating deductions or postponing income into the following year could be useful. In other situations, taking the opposite approach may be more appropriate, which is why the best choice depends on your individual tax position.

Plan Charitable Contributions Carefully

Charitable giving often increases near year-end, and a little planning may improve the potential tax benefits of those gifts. If you plan to donate, retain receipts and written acknowledgments for each contribution.

In some cases, donating appreciated securities rather than cash may be worth considering. Taxpayers who itemize may also benefit from grouping multiple years of charitable gifts into one year, depending on their circumstances.

To be considered for the current tax year, donations must be completed before year-end. Taking time to document gifts as they are made can make it easier to prepare an accurate tax return later.

Complete Required Minimum Distributions

Retirees who must take Required Minimum Distributions, or RMDs, should verify that the distributions are completed before the end of the year. Failing to take a required distribution can lead to penalties, making this a critical item on a year-end retirement planning checklist.

If charitable giving is part of your plans, a Qualified Charitable Distribution, or QCD, may be an option for eligible individuals. A QCD allows a gift to be sent directly from an IRA to a qualifying charity and may satisfy all or part of an RMD while receiving favorable tax treatment.

Prepare Records for the Upcoming Tax Season

If you are saving for education through a 529 plan, use year-end to review your contributions. Certain states provide tax benefits for qualifying 529 contributions, and even modest additions can support education savings over time.

Beginning your record organization before January can also make tax preparation much less stressful. Gather charitable-giving documentation, mortgage interest statements, property tax information, investment records, childcare expense documents, self-employment income details, and medical expense records.

Solid bookkeeping and organized records can help ensure that potential deductions and credits are not missed. They can also make it easier to respond promptly when tax documents begin arriving after the new year.

Take a Proactive Approach Before December 31

The last few weeks of the year can pass quickly, and many tax planning opportunities expire when the calendar turns. Reviewing withholding, retirement contributions, health accounts, investments, charitable gifts, required distributions, education savings, and tax records can help make filing season more manageable and reduce avoidable surprises.

Ryan J Bourlier CPA LLC provides financial services for individuals in Kimball, Nebraska, and beyond, including tax planning, bookkeeping, investment management, and retirement planning. If you would like help reviewing your year-end tax situation, our team can help you understand the available options and make informed decisions before the year ends.