Checklist for Year-End Reviews

Issues and Opportunities to Address by December 31^st

One good thing about the calendar is that it forces both closures and new beginnings. Or, for those matters not dependent on the calendar, it provides an opportunity to discuss and review with you important financial planning issues, at least once a year

We always look to discuss, first and foremost, what is on your mind -- what are your most pressing issues?  Look over the checklist of items below to review -- soon. (Please contact us to schedule a telephone or in-person review) 

Here are some topics for discussion; things that need to be addressed before Thursday, December 31, 2009.

Schedule D

• Analyze your realized and unrealized gains and losses for the year
  
• Loss carry-forwards from last year
  
• Any sales of appreciated property, such as real estate or art work
  
• Identify transactions that can help improve your tax situation
  

AMT Check

• Because several common year-end tax strategies assume payment under the regular tax system, make sure you can actually benefit from such strategies. If you will be subject to the alternative minimum tax (AMT) this year, the usual advice to defer income and accelerate deductions may be reversed. If in doubt, we recommend that you see your tax advisor well before the year is over to address AMT issues.
  

Deduction Check

• You should check with your tax advisor to assess your ability to itemize deductions rather than claiming the standard deduction. If you have a low mortgage amount, low (or no) state income tax, and few charitable contributions you could qualify for the standard deduction, in which case the usual advice to rack up lots of tax deductions before year-end may be inappropriate (unless such expenditures tip you over the standard deduction amount). The standard deduction for 2009 is $11,400 if married filing jointly, $5,799 if single or married filing separately, and $8,350 if head of household.
  

Write Checks

• The usual tax-deductible expenses. Make sure your mortgage payment is made before year-end, and consider prepaying certain other expenses, such as state income tax. However, don’t bother prepaying interest, insurance premiums, or rent on investment property; these prepayments cannot be deducted.
  
• Business expenses deductible on Schedule C. This may be the perfect time for self-employed clients to upgrade their computer or purchase office equipment. Charges to a credit card qualify as long as they’re made before year-end.
  
• Contributions to 529 plans. If your state allows for a deduction for 529 contributions, you need to get your contributions postmarked by December 31^st. (While not applicable in California, check your or the beneficiary’s home state to see if they provide state tax or other benefits that are only available for investments in the home state’s 529 plan)
  
• $13,000 gifts to family members. This time-honored way to gradually remove assets from your estate free of gift or estate tax requires transfers to be made by December 31^st.
  
• Charitable contributions. These may be made by check or credit card. Contributions may be given directly to the charity, or made via a donor-advised fund or one of the more sophisticated charitable vehicles, such as a family foundation or charitable remainder trust. We can assist you in coordinating your charitable planning and tax panning by considering the donation of appreciated securities, and help you integrate charitable giving into your overall financial plan. Ask us about our donor-advised fund offering.
  
• 401(k) plan contribution check. Clients who have not maxed out their 401(k) contributions must do so before the end of the year or lose the opportunity to do so. Check the terms of the individual plan, but the federal maximum for 2009 is $16,500 plus $5,500 catch-up for participants over age 50. Self-employed clients with solo 401(k)s need to get those checks in – and if you don’t have a retirement plan yet, we can help you determine the best one for your needs. If you choose a plan with a December 31^st deadline, we will help make sure it gets established by year-end.
  
• RMD checks. Required Minimum Distributions (RMDs) from traditional IRAs are waived for 2009, but some clients may have already received unwanted distributions. You have 60 days or until November 30^th, whichever comes later, to put the money back into the IRA. For better coordination of IRAs, if you have more than one IRA then consider consolidating accounts so that only one financial institution is involved in calculating and reporting RMDs. Consider whether or not a conversion to a Roth IRA is appropriate given your current income and estate-planning goals. (We will be addressing Roth IRA conversions in-depth in the near future – stay tuned!)
  
• Credit check. Remember that you can now get one free credit report from each of the three credit agencies every 12 months by following the instructions at Annual Credit Report.com. This is the official site for ordering the free credit reports from all three agencies without being pitched additional services. In addition to checking for errors and correcting any missing or misinformation, you might take this opportunity to find out your credit score (this does cost an extra fee) and take steps to improve it, especially if you are considering applying for a mortgage or other loan in the near future.
  

Planning for 2010

• Milestone birthdays. Will anyone in your family be turning 59 ½ or 70 ½ this year? Make sure they know their rights and responsibilities with regard to IRA distributions. Full retirement age for Social Security is now 66. Early benefits can still be received at age 62, but anyone who plans to beat the life expectancy game by living past 78 or so should wait as long as possible (up to age 70) to apply.
  
• College planning. The Free Application for Federal Student Aid (FAFSA) is due early in the year – before most people have their tax information together. First time FAFSA filers need to know that when it comes to getting scholarships and aid at some colleges, speed is more important than accuracy and that they may base their information on estimates rather than waiting until all their tax information is in. Clients with children (and grandchildren) need to think about their college savings plans and get into the habit of making regular contributions to a 529 plan.
  
• Retirement plan contributions. Know the contribution deadline dates for your retirement plan. In some cases it’s the date you file your tax return including extensions; that means you must make the contribution before filing your tax return, whether that occurs on April 15^th or October 15^th. IRA and SEP contributions must be in by April 15^th. The maximum IRA contribution remains at $5,000 in 2010. The catch-up contribution for people over 50 remains $1,000. This is an opportunity to do general retirement planning, running numbers to make sure you are on track to meet your retirement goals and adjust the strategy or the goal as necessary.
  
• Household budgets. Retirees need to pay close attention to their spending patterns in order to gauge retirement plan withdrawal rates. You should review your budgets, especially those areas affected by inflation. In addition to areas affected by general inflation, increased health care spending should be discussed which may necessitate a review of your retirement income plan.
  
• Family dynamics. Any weddings on the horizon? Divorces? Babies? Let’s talk about the extended family – spouses, children, parents, grandparents – and the planning needed for each. We’ve dealt with marriage, divorce, widowhood, new babies, and caring for aging parents. We can help you make financial planning the family affair that it is.

Green Valley Wealth Advisors | Nov. 23, 2009

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