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End of Year Accounting Checklist

The holidays make December a hectic and stressful time for everyone. Don’t compound that stress by letting your bookkeeping get out of control. A few small steps taken now towards organizing your accounts can pay dividends when it comes to tax time in the spring. Instead of waiting two or three months to start working on your taxes, take care of a few important measures now while it’s all still fresh in your mind. Our accounting checklist includes nine tasks you should definitely stay on top of at the end of the year.

1. Max out your employer contributions

Never commit the cardinal sin of leaving free money on the table. If your employer has a matching program for 401(k) contributions or health savings accounts (HSAs), be sure to contribute the amount required to take advantage of the match.

2. Consider converting to a ROTH

With so many people unemployed due to national quarantine, your income may be much lower this year than it normally is. This could be a perfect opportunity to convert IRAs or 401(k)s to ROTH accounts. You’ll pay the taxes on the conversion now, but you’ll be able to withdraw the money tax-free in your retirement.

3. Make charitable contributions

Charities, especially religious ones, have been hard hit this year by not seeing people in person. Remember your charitable contributions can be tax-deductible and in some cases, employers will match your contribution to qualifying organizations.

4. Finalize your medical spending

Clear out any expiring flexible spending account (FSA) funds. Visit the doctor, fill your prescriptions, or buy over the counter medicine. If you’ve met your deductible for the year, you should take advantage of the medical benefits you’re entitled to.

5. Consider refinancing

If you have mortgages or home equity loans, get the most out of the current low interest rates by refinancing. You’ll get a tax benefit on the interest you pay and potentially cut years and tens of thousands of dollars from your loan!

6. Clean up paperwork

If you have stacks of credit card bills, receipts, and bank statements, it’s time to get busy filing. Don’t wait until next year’s papers start adding to the pile. Sort and file your bills, scan receipts, and reconcile your accounts now. When it’s time for tax filing, you’ll be glad you won’t have a mountain of papers to sift through.

7. Gather interest statements

It can be maddening trying to remember all the places to get your interest statements from for tax prep. Student loans, savings accounts, mortgage accounts, money market accounts, checking accounts… each will have its own tax statement you’ll have to download and give to your tax preparer. By starting on this task now, you’ll give yourself an easier time in April.

8. Gather W-9 and 1099 forms

If you did any freelance work, your employer will need to provide you with a 1099.  If you hired any independent contractors for your business you’ll need to make sure you have a W-9 form for them. Since taxes are not taken out of these payments, the IRS needs you to report it. Independent contractors need to set some of their pay aside to pay taxes or they may come up short in April.

9. Review your insurance policies (home, auto, rental, liability, life, etc.)

Make sure beneficiaries are current. Shop your policies to make sure you get the best rate. Alter your coverage based on your needs.

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