Download the following support materials:

Year End Checklist
RMD Quick Reference Guide
Tax Facts at a Glance
The Current State of 401(k)s

Why It Matters:
  • Many tax- and investment-related deadlines are approaching at the end of the year.
  • Procrastination can be costly for clients if they don’t take certain actions before December 31.
  • Sharing a few ideas with clients shows you’re engaged and looking out for their best interest.

Every book of business has a few clients who operate under the following philosophy:

Why do today what you can put off until tomorrow?

From filing their taxes to making plans for New Year’s Eve, these clients often wait until the last possible moment to take action. With the holiday season approaching, it’s important to remind procrastinating clients about these nine financial ‘must-dos’ before time runs out on December 31.

1. Top off HSA

All contributions added to a health savings account are 100% tax deductible, as long as they’re made by the end of the calendar year. Here are the IRS limits for 2017:

  • Individuals can save up to $3,400
  • Families can save up to $6,750
  • Individuals 55-plus can save an extra $1,000
2. Use all FSA savings

If your client’s company doesn’t offer a grace period or allow the funds to carry over to 2018, any money left in a flexible spending account at the end of the year will be lost. Generally speaking, clients can use FSA dollars on the qualifying medical expenses listed in IRS Publication 502.

Here are some ideas for how to spend it before the use-it-or-lose-it deadline:

  • Eyeglasses or contact lenses
  • Hearing aids
  • Acupuncture
  • Chiropractic care
  • LASIK surgery
  • Weight loss and stop-smoking programs
  • Dental care
  • Vasectomy
3. Adjust tax withholding and update beneficiary designations

Clients who got married, divorced, or had a child in 2017 should adjust their W-4 withholdings. Otherwise, they could end up giving the government an interest-free loan. Perhaps worse, they could have to write a check to the IRS if they didn’t pay enough in taxes.

These clients should also use this opportunity to update their beneficiary designations.

4. Max out 401(k) contributions

For 401(k), TSP, 403(b), or 457 contributions to be tax deductible, they must be made by December 31:

  • Workers under 50 can contribute up to $18,000 in 2017
  • Workers 50-plus can make catch-up contributions up to $24,000.
  • Your clients should, at the very least, contribute enough to get any employer match.
5. Consider a Roth conversion

If you have clients who will be in an unusually low tax bracket this year, you might suggest the advantages of adding income to their return through a Roth IRA conversion.

6. Donate to charity

To be included on 2017 tax returns, charitable contributions are due by December 31. As an alternative to donating cash, your clients may want to consider donating stock or mutual fund shares that have appreciated in value.

By transferring stock or a mutual fund to a charity, clients can avoid paying capital gains on the investment, and they can deduct the fair-market value from their taxable income if the investment was held for more than one year. Plus, the receiving charity doesn’t have to pay taxes when it sells the stock or mutual fund.

7. Contribute to a 529 plan

This holiday season, why not give the gift that keeps on giving? Contributions to a 529 plan will grow tax-free and can help your client’s child or grandchild pay for qualified education expenses.

As an added bonus, some states offer additional tax benefits for contributions made in the same calendar year.

Remember, gifts exceeding $14,000 per person will be subject to a gift tax.

8. Take advantage of the IRS Saver’s Credit

Clients who contribute to a qualifying retirement account may be eligible to claim the Saver’s Credit – a tax credit worth up to 50% of contributions to a retirement plan or IRA. Individuals can receive up to $2,000 in tax credits, while the limit is $4,000 for families.

9. Take required minimum distributions (RMDs)

Clients who are retired and turned 70½ this year are required to take their first RMD from IRAs or retirement accounts such as 401(k)s by April 1, 2018. Their second RMD must be taken by December 31, 2018.

Those who wish to avoid having both withdrawals included on their 2018 tax return should make their first withdrawal by December 31 this year.

For a more in-depth look at RMDs, share our Knowledge Place article with clients.

That covers nine year-end to-dos. Feel free to round out the list with your own personal favorites as you sit down with clients in the next couple months.

Things to Consider:
  • For high-income clients, see if they have stocks or mutual funds that can be gifted to charity.
  • Remind clients about the tax advantages if they have a health savings account (HSA).
  • Help clients navigate the use-it-or-lose-it aspect of flexible spending accounts (FSAs).

Neither Transamerica nor its agents or representatives may provide tax, investment or legal advice.  Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.