What to Do Before the Tax Year Ends December 31st


For most taxpayers, Dec. 31st is the last day to take actions that will impact their 2018 tax returns. Now that the October 15th tax extension deadline has passed, we’d like to remind taxpayers there are several things they should do now to get ready for next year.

First, taxpayers should check their tax withholding before the end of the year as there are several new factors that could affect refunds in 2019. Taking a closer look at the taxes being withheld can help ensure the right amount is being taken out of your paycheck each period, either for tax refund purposes or to avoid an unexpected tax bill next year. You can use the IRS Withholding Calculator to estimate the amount you should have withheld and determine if you need to provide your employer with a new Form W-4.


Retirement Benefits & Contributions

Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2018, though a special rule allows those who reached 70 ½ in 2018 to wait until April 1, 2019 to receive them.

Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2018 IRA contributions until April 15, 2019. For 2018, the limit for a 401(k) is $18,500. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a SIMPLE IRA for age 50 or older.


Relocation and Name Changes

Taxpayers who have moved should tell the US Postal Service, their employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.

For name changes due to marriage or divorce, notify the Social Security Administration (SSA) so the new name will match IRS and SSA records. Also, notify the SSA if a dependent’s name changed in 2018.  A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Charitable Contributions

Charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2018 count for the 2018 tax year, even if the bill isn’t paid until 2019. Checks to a charity count for 2018 if they are mailed by the last day of the year.

If you gave any group more than $250, be sure to get an annual acknowledgment letter, receipt or statement from them before you file your 2018 tax return. These documents are required to be in your possession BEFORE you  file your return; otherwise, the IRS can disallow an otherwise legitimate donation.

It’s also important to be sure any charity you are giving to is a qualified organization as only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible even if they are not listed in the tool’s database.

William D. Truax and his friendly team of Enrolled Agents (EAs) and licensed tax preparers have been helping individuals and business handle even the most complex tax situations for over 30 years. They understand how the tax system works are and offer a full spectrum of financial services to help ensure the IRS doesn’t come knocking.

Mr. Truax is a member of the Bar of the United States Tax Court, a Fellow and Accredited Tax Advisor of the National Association of Tax Professionals and a member of the National Association of Enrolled Agents.

For more information, please visit www.truax.net or click below to schedule a free consultation today!