As the year draws to a close, December becomes a crucial time for taxpayers to review their financial standing and take key actions that can significantly impact their tax outcomes for 2024. Whether you’re managing income changes, marital adjustments, or property sales, these year-end deadlines are critical to avoid penalties and maximize tax benefits. Here’s a comprehensive guide to help you navigate December’s most important tax deadlines and prepare effectively.
December 2: Start Year-End Tax Planning
December marks the final opportunity to optimize your tax strategy for 2024. Taxpayers experiencing significant income changes, a new marital status, adjustments to dependent status, or property sales should schedule a consultation with a tax professional. Proactive planning can help minimize liabilities and ensure you take advantage of all eligible deductions and credits before the year ends.
December 10: Report November Tips to Your Employer
If you’re an employee who earned more than $20 in tips during November, you’re required to report these tips to your employer using IRS Form 4070 by December 10. Employers are obligated to withhold FICA taxes and income tax for reported tips from your regular wages.
- What Happens If Wages Are Insufficient?
If your regular wages don’t cover the required FICA and tax withholdings, the uncollected amount will appear in Box 12 of your W-2 form. You’ll need to pay these uncollected taxes when filing your annual return.
Tip: Reporting tips on time ensures compliance and avoids complications during tax filing.
December 31: Key Deadlines You Shouldn’t Miss
1. Mandatory IRA Withdrawals for Seniors
- Who Is Affected?
If you were born before January 1, 1951, you must take a Required Minimum Distribution (RMD) from your Traditional IRA by December 31 to avoid penalties.- Special Rule for 73-Year-Olds in 2024:
Those born between January 1, 1951, and December 31, 1951, can delay their first RMD until April 1, 2025. However, delaying means taking two distributions in 2025—one for 2024 and one for 2025—which could impact your tax bracket.
- Special Rule for 73-Year-Olds in 2024:
- Plan Ahead:
If your financial institution is closed on December 31, ensure the distribution is processed before the deadline to avoid a 50% penalty on the missed RMD amount.
2. Pay Deductible Expenses for 2024
The end of the year is also the deadline to pay expenses that you plan to deduct on your 2024 tax return. These could include medical bills, charitable contributions, or business-related expenses.
- Exceptions:
Contributions to IRAs, SEPs, and Keogh plans can still be made after December 31, as long as they fall within the allowed timeframe for 2024 contributions.
3. Financial Institution Closures
December 31 might fall on a weekend or holiday, and some financial institutions may be closed. If your year-end actions, such as wire transfers or payments, require interaction with a financial institution, ensure these tasks are completed earlier to avoid missing deadlines.
Additional Considerations: Weekends, Holidays, and Disaster Areas
Weekend and Holiday Extensions
If a tax-related deadline falls on a weekend or federal holiday, it will automatically move to the next business day. This can provide extra time for meeting obligations, but always confirm specific deadlines to avoid missteps.
Disaster Area Extensions
In regions declared as disaster areas, the IRS often extends tax deadlines. To determine if your area qualifies and to find updated deadlines:
- Visit FEMA’s Disaster Declarations for official designations.
- Check the IRS’s Tax Relief in Disaster Situations for applicable extensions.
Why Early Action Matters
Procrastination during the holiday season can lead to missed opportunities and costly penalties. Taking action early allows you to:
- Avoid last-minute stress.
- Address unforeseen delays caused by financial institution closures.
- Maximize deductions and meet compliance requirements on time.
Conclusion: Your Year-End Tax Checklist
December’s tax deadlines are critical for ensuring compliance and optimizing your financial outcomes. Here’s a quick recap of essential actions to complete before year-end:
- December 2: Schedule a tax planning consultation.
- December 10: Report tips earned in November to your employer using IRS Form 4070.
- December 31:
- Take required IRA distributions.
- Pay deductible expenses for 2024.
- Ensure financial transactions are processed before closures.
By staying organized and proactive, you’ll close out the year with confidence and set yourself up for a smoother tax season in 2025. Don’t hesitate to consult a tax professional to address your unique situation and ensure compliance with all deadlines.
Prepare today to save tomorrow!
