As the calendar year draws to a close, holiday plans can easily take priority over financial decisions. Still, the final weeks of the year are an important time to look at your tax picture and identify planning steps that may no longer be available after December 31.

A thoughtful year-end review can reduce filing-season stress, help prevent an unexpected tax bill, and reveal potential tax-saving opportunities. Whether your financial situation changed significantly this year or remained largely the same, a few timely decisions may help you enter the new year better prepared.

Check Your Withholding and Estimated Payments

Your paycheck withholding should reflect your current circumstances, but life and income changes during the year can affect the amount of tax you ultimately owe. Starting a new job, receiving a raise, retiring, earning investment income, becoming self-employed, or experiencing a family change can all alter your tax situation.

If your employer has withheld too little from your pay, you could face a balance due when your return is filed. On the other hand, excessive withholding means more of your money has been paid toward taxes throughout the year than may have been necessary.

It is equally important to review estimated tax payments if you receive income that does not have tax withheld. This may include self-employment earnings, rental income, investment income, or retirement income. An underpayment can result in a tax balance and possible penalties, so a year-end review may help determine whether an additional payment is appropriate before year-end or before the final estimated-tax deadline.

Review Retirement Plan Contributions

Year-end is a practical time to revisit retirement savings. Contributions to workplace retirement accounts, including 401(k) and 403(b) plans, generally need to be made through payroll deductions before the year ends.

Consider whether increasing contributions during your remaining pay periods makes sense. Additional contributions may reduce taxable income while also helping you build more retirement savings. This is also a good time to confirm that you are contributing enough to receive any employer matching contribution that may be available.

Some individuals may also want to evaluate a Roth IRA conversion before December 31. A conversion generally creates taxable income in the year it is completed, but qualified withdrawals from a Roth IRA may be tax-free in the future. Because the potential impact varies from one taxpayer to another, this decision deserves careful consideration.

Use Health Savings and Flexible Spending Accounts Wisely

If you are enrolled in a qualifying high-deductible health plan, a Health Savings Account, or HSA, may provide meaningful tax advantages. Eligible contributions may be deductible, account earnings can grow tax-deferred, and withdrawals for qualified medical expenses are generally tax-free.

If you have not yet reached your allowable HSA contribution limit, there may still be an opportunity to contribute more before the applicable deadline. Reviewing the account before the year ends can help you understand what room remains.

Also take a close look at your Flexible Spending Account, or FSA. Many FSA plans follow use-it-or-lose-it rules, so money that is not used within the plan’s permitted period could be forfeited. Since plan provisions differ by employer, checking your remaining balance now may help you avoid losing available funds. Open enrollment can also be a useful time to determine whether your FSA election continues to meet your family’s needs.

Consider Investments and Income Timing

For investments that have declined in value this year, tax-loss harvesting may be worth reviewing. Selling an investment at a loss can potentially offset capital gains, and excess losses may sometimes offset a limited amount of ordinary income.

This approach should be weighed against your long-term investment objectives. It is also important to understand IRS wash-sale rules, which can limit a tax benefit when substantially similar investments are repurchased too soon after a sale.

The timing of income and deductible expenses can matter as well. Depending on your individual circumstances, it could be helpful to accelerate certain deductions or defer income into the following year. In other situations, the reverse may be more beneficial. The appropriate approach depends on your overall tax position.

Plan Charitable Gifts Before Year-End

Charitable giving often increases near the end of the year, and advance planning may help maximize the available tax benefits. If you plan to make donations, retain receipts and acknowledgments for each contribution.

Depending on your circumstances, it may be worth considering a gift of appreciated securities rather than cash. Taxpayers who itemize deductions may also want to consider whether grouping several years of charitable gifts into one year could be beneficial.

To be counted on this year’s tax return, donations generally need to be completed by year-end. Addressing planned gifts before the final days of December can help ensure the timing is not overlooked.

Complete Required Minimum Distributions

If you are subject to Required Minimum Distributions, or RMDs, make sure the required amount is taken before year-end. Missing an RMD can lead to penalties, making this an especially important item for retirees to verify.

If charitable giving is part of your plans, a Qualified Charitable Distribution, or QCD, may be an option for eligible individuals. A direct charitable gift from an IRA can satisfy all or part of an RMD while potentially receiving favorable tax treatment.

Prepare Tax Records for Filing Season

Individuals saving for education through a 529 plan may also want to review their contributions before the year closes. Some states offer tax benefits for qualifying contributions, and even modest additions can support education savings over time.

It is also helpful to start organizing tax documents before January arrives. Gather charitable contribution records, mortgage interest statements, property-tax documents, investment information, childcare expense records, self-employment income details, and medical expense documentation.

Having these records together early can make tax filing more manageable and can help reduce the risk that deductions or credits are missed. The end of the year passes quickly, and many tax-planning options expire as soon as the calendar changes.

Reviewing withholding, retirement contributions, health accounts, investments, charitable plans, required distributions, education savings, and tax records can help make the upcoming filing season smoother and minimize unwelcome surprises. Paul Cox & Todd can help you review your year-end tax situation, understand available options, and consider planning opportunities before the year ends.