10 Money Moves You Need to Make Before the End of the Year


2015 is just around the corner.

But before you even start thinking about next year's resolutions, you need to finish 2014 on a strong note. Like Yogi Berra said, "It ain't over 'til it's over." Here are the top 10 money moves you need to make before the end of 2014.

1. Double Check Your Federal Tax Withholdings

With four or fewer bi-weekly paychecks left, you now have a good idea of your gross income for 2014. Estimate how much you will pay in federal taxes and check that number against what you have withheld in federal taxes so far. You can find out how much your employer has held in federal taxes in your latest paystub(s).

If you have withheld too little, you have two options to catch up:

  • Adjust item 6 on your Form W-4 with your employer(s): You can withhold additional amounts for federal taxes from each remaining paycheck.
  • Use Payment Voucher 4 from Form 1040-ES to make an additional federal tax payment by January 15, 2015 at the latest.

2. Maximize Your Retirement Account Contributions

Use it or lose it.

Your tax-advantaged retirement accounts face a yearly contribution limit. For example, in 2014 you can only contribute up to $5,500 ($6,500 if you're age 50 or older) to your traditional or Roth IRA. For 401(k)s, the contribution limit is set at $18,000.

Failing to meet your annual contribution ceiling, means you're limiting the size of your retirement account. If you have a bonus or lucky windfall, use it to maximize this year's contribution to your nest egg. Not only will your future self thank you, but also you will enjoy a tax deferral benefit in the amount of your contributions when you declare taxes on 2015.

3. Make Donations

Most cash and non-cash donations are tax deductible. The key is that you must complete all donations by December 31, 2014 for them to be eligible for 2015's tax form.

Here are some donation ideas that can help reduce your tax bill.

Note: If your noncash charitable contribution is over $500, you are required to submit Form 8283 with your federal tax forms.

4. Request and Review Your Free Credit Reports

Every year you're entitled to free credit reports from Equifax, Experian, and TransUnion. If you haven't requested these for 2014, then request yours at AnnualCreditReport.com. The process is free and it can be completed online or via mail. You can make this request once every 12 months.

Once you receive your credit reports, check for:

  • Store and credit cards that you don't recognize,
  • Installment loans that you didn't request,
  • Credit denials for applications that you didn't initiate,
  • Mailing addresses that are not yours,
  • Inquiries from companies you've never contacted,
  • Erroneous account balances, and
  • Public records that shouldn't be there anymore.

If you find any errors, contact the company that issued the account or the respective credit reporting agency.

5. Use Up Your Flexible Spending Account

By contributing up to $2,500 into your Flexible Spending Account (FSA) throughout the year, you're saving responsibly for a rainy day. However, if you're not careful, you may lose most of that money.

Generally, you have to use all the money within the same year. However, some plans may offer one of these two options:

  • Up to two and half months extra time to use the money in your FSA, or
  • Up to $500 of your balance to be carried over to the next year.

Check with your plan manager to see if you have either option, and use your FSA funds accordingly.

6. Review Health Insurance Coverage for 2015

Open enrollment for 2015 health coverage starts November 15, 2014.

Visit HealthCare.gov and contact your plan provider:

  • Check if you qualify to save on health insurance coverage;
  • Compare prices of equivalent plans with other providers;
  • Estimate prices for 2015 coverage; and
  • Inquire if you need to do anything to continue coverage with your current plan.

Remember that the deadline to sign up for 2015 coverage is February 15, 2015. After that date, you can't enroll for 2015 coverage unless under special circumstances.

7. Use Up Health Insurance Benefit Levels

Your plan's benefit level is the maximum amount your plan's provider agrees to pay for a specific covered benefit.

For example, imagine that your vision insurance plan covers up to $250 in qualifying eyeglasses frames per year. If you don't buy eyeglasses during this year, then you lose that benefit. If you are anything like me, you go through eyeglasses like tissues during a showing of The Notebook. You're better off getting an extra pair at a very low cost.

Make smart use of leftover benefit levels from 2014 before they are gone for good.

8. Defer Income (and Taxes!)

Attention freelancers and self-employed individuals: if you are completing work towards the end of the year, there is no rush to send out invoices by December 31, 2014. Unless your client or employer demands invoices to be submitted by that date, hold off on sending those invoices so that you can defer applicable income taxes until 2016.

9. Take Your Minimum Required Distribution

  • If you're over age 70 ½, you must take your required minimum distribution (RMD) from your IRA or 401(K) before the end of the year. Otherwise, the IRS will slap you with a very steep penalty: the amount not withdrawn is taxed at 50%.
  • In the unfortunate event that you don't take your 2014 RMD in full due to a reasonable error, the IRS may waive the penalty if you qualify for relief. Submit Form 5329 and attach a letter of explanation.
  • If you reached age 70 ½ this 2014, you have until April 1, 2015 to take 2014's RMD. However, it is a good idea to still take 2014's RMD this year. That way you avoid taking two RMDs in 2015.

10. Open Up a 529 College-Savings Plan

With the average student debt of 2012 American college graduates nearing $30,000, you might consider lending your children or grandkids a hand.

By opening and contributing to a 529 college-saving plan by December 31, 2014, you can start saving up for that child's college education. Your beneficiary will be able use the money-tax free on qualifying expenses, and you may receive a state income tax deduction for your contribution (Note: As of 2014, 34 states and the District of Columbia offer state tax deductions).

Hurry up! The time to act is now.

What smart money moves are you taking for 2015? Please share in comments!

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Guest's picture

Would be great if I could find this info for Canadian taxpayers. Good stuff here.

Damian Davila's picture

I completed my BCom at the University of Alberta back in 2002 and had to complete my own tax forms for a couple of years, however I have not kept up with the Canadian tax system since then. Maybe some of our Canadian readers can point you to some useful resources.

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