OK< here is the obligatory task for end of year tax items:
Key Actions for Individuals
- Maximize Retirement Contributions: Increase contributions to tax-advantaged accounts like your 401(k) (up to $23,500, more with catch-up) and IRA (up to $7,000, more if age 50+).
- Take Required Minimum Distributions (RMDs): If you are age 73 or older, ensure you take your RMD from retirement accounts by December 31 to avoid a steep penalty.
- Harvest Investment Losses: Sell investments with losses to offset capital gains and potentially deduct up to $3,000 of net capital losses against ordinary income.
- Make Charitable Contributions: Donate to qualified charities. Consider making a Qualified Charitable Distribution (QCD) directly from your IRA if you are 70½ or older, which can satisfy your RMD.
- Use Flexible Spending Accounts (FSAs): Spend any remaining funds in your health or dependent care FSA by year-end, as most plans are "use it or lose it" unless your employer offers a grace period or rollover.
- Review Withholdings and Estimated Taxes: Check your W-4 or make estimated tax payments to the IRS by the final quarterly deadline (usually January 15) to avoid penalties.
Key Actions for Businesses
- Optimize Business Expenses: Consider making qualifying business-related purchases or paying expenses before year-end to reduce taxable income.
- Evaluate Tax Credits: Assess if your business qualifies for valuable tax credits, which can significantly reduce your tax liability.
- Finalize Payroll: Verify all employee wages, benefits, and deductions are correct for the year.
- Consult a Tax Advisor: Meet with a tax professional to discuss recent tax law changes (like the "One Big Beautiful Bill Act") and plan for the future.
Part 2: Documents to Gather for Tax Filing (In the New Year)
Once the year is over, you will need to gather specific forms and records to file your tax return. The IRS provides a helpful guide on gathering your documents on their official website.
Personal Information
- Social Security Numbers (SSNs) or Individual Taxpayer Identification Numbers (ITINs) for yourself, your spouse, and all dependents.
- Bank account and routing numbers for direct deposit of any refund.
- Copy of last year's tax return.
Income Documents
- Forms W-2 (wages, salary from employers).
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Forms 1099 (from banks, investment firms, government agencies):
- 1099-INT (interest income).
- 1099-DIV (dividend income).
- 1099-R (retirement plan distributions, pensions, annuities).
- 1099-G (unemployment compensation, state/local tax refunds).
- 1099-MISC or 1099-NEC (miscellaneous income, non-employee compensation).
- 1099-K (payment card and third-party network transactions, e.g., gig economy income).
- Form 1095-A (Health Insurance Marketplace Statement).
- Records of virtual currency (cryptocurrency) transactions.
Deductions and Credits Documents
- Childcare/Dependent Care: Total expenses and provider information.
- Education Expenses: Forms 1098-T (tuition statement) and receipts for books/supplies for potential credits or deductions.
- Homeownership: Forms 1098 (mortgage interest statement) and records of property taxes paid.
- Charitable Donations: Records and receipts for all cash and non-cash contributions.
- Medical Expenses: Records if total expenses exceed 7.5% of your AGI and you itemize deductions.
- Health Savings Account (HSA) / Flexible Spending Account (FSA): Records of contributions and expenses.