November 13th 2023

To repeat - timing is everything. Here are my thoughts on tax-related timing.

* Make your current year contributions to a traditional or ROTH IRA, Coverdell Education IRA, Section 529 College Savings Account, of Health Savings Account on the first business day of the year – usually January 2^nd. Thanks to the “magic” of tax-free compounding, by making your contributions on the first available day of the year you will have substantially more in the accounts when you are ready to retire or when you need money for education or medical costs.

* Take your RMDs (Required Minimum Distributions) from retirement accounts as late as possible in December. Again, to maximize tax-free accrual.

* If you know you will be getting Married during the year, change your withholding status with your employer(s) to increase federal and state income tax withholding as soon as possible. You may not be getting married until the fall, but your tax status as married will be effective for the entire year. If you know in 2023 you will be getting married in 2024, no matter when in the year, change your withholding now to be effective January 1, 2024. (Some related advice - if you change your last name due to marriage immediately report the change to the Social Security Administration).

* If you experience a “major life event” – any of the events listed below – contact your tax professional as soon as possible to discuss the tax implications and plan accordingly. Do not wait until you meet with your preparer in February or March of the following year – it may be too late to avoid penalty and interest.

• you got married, divorced, or become widowed
• you had or adopted a child
• you changed jobs
• your spouse started working
• you have a substantial increase or decrease in income
• you have a substantial gain from the sale of stocks or bonds
• you bought or sold a home or rental real estate
• you started, acquired, or sold a business
• you retired
• you started to receive Social Security benefits
• you made unplanned withdrawals from an IRA or pension plan
• you received an inheritance
• you received correspondence from the IRS or a state tax agency

Actually, you should consult your, or a, Tax Professional BEFORE many of these events begin. For example, if you are beginning the process of divorce, you should consult a tax professional for guidance in negotiating the divorce agreement, any custody agreement, and the distribution of assets.

TTFN

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