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Do You Have December in 3-D?

Besides being the end of the calendar year, December 31 is also the deadline for executing many financial transactions, particularly those that are reported on individual tax returns. Because alliteration helps some people remember things, here are “3-D” categories of year-end transactions that you may want to review.

Donations: This applies to charitable contributions, which are reported on Schedule A for those who itemize deductions. Per the IRS at www.irs.gov, donations are deductible in the year made. However, different types of donations have different transaction dates. For example…

Donations charged to a credit card before the end of 2016 count for 2016, even if the credit card bill isn’t paid until 2017.

Donations paid by checks count for 2016 as long as they are mailed in 2016. However, there are two exceptions: A postdated check is not an immediately payable contribution, but a promise to pay on the date shown. And if a check bounces because of insufficient funds, the gift will not be deemed to have been made when it was mailed or delivered.

The date of donation for stocks, bonds, real estate or other financial assets varies. If you need to include the donation in this year’s tax return, be sure to seek professional assistance.

Deposits: Many government-regulated savings and retirement plans have annual limits on deposits, with the plan year ending on December 31. This applies to most employer-sponsored qualified retirement plans, such as 401(k)s, TSAs and SEPs (but not IRAs, where deposits for this year can be deferred until April 15, 2017).

While most retirement plans require regular deposits throughout the year from each paycheck, some employees may qualify for additional lump-sum deposits at the end of the year. A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to their regular deposits. Employees who receive year-end bonuses can usually specify a higher or lower percentage of the bonus to be deposited to their accounts.

December 31 is also the cut-off date for annual contributions to 529 college saving accounts. Deposits to a 529 are limited by donor; the amount given by one person cannot exceed the annual gift tax exclusion, currently $14,000. However, under some conditions, 529 rules also allow donors to make lump-sum deposits in advance, equal to five years of deposits.

Distributions: Many government-authorized savings plans require annual documentation of distributions as well as deposits. For retirees over 70½, this applies to Required Minimum Distributions (RMDs) from qualified retirement plans. Participants may withdraw more than the RMD, but failure to withdraw the minimum by December 31 can result in tax penalties.

Retirees who are just starting RMDs do not have to make their first withdrawal until April 1, following the calendar year in which they are 70½. However, waiting results in two RMDs that year, one due on April 1, the other on December 31. To avoid having both of these amounts included in your income for the same year, you can make your first withdrawal by December 31 of the year you turn 70½ instead of waiting until April 1 of the following year.

Participants in 529 saving accounts may encounter an interesting year-end twist. Many colleges send bills in December for tuition due in January for a new semester. When owners choose to pay this bill from a 529, they must be able to match distributions with expenses—on a yearly basis. A December 2016 distribution for a January 2017 expense can, in some instances, have an income tax or financial aid impact.

This article was prepared by an independent third party. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Avenue, 9 Fl., New York, NY 10017, 212-541-8800. Securities products/services and advisory services offered through PAS, a registered broker/dealer and investment adviser. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Wealth Advisory Group LLC is not an affiliae or subsidiary of PAS or Guardian.

PAS is a member FINRA, SIPC.

Neither Guardian, PAS, Wealth Advisory Group, their affiliates/subsidiaries, nor their representatives render tax or legal advice. Please consult your own independent CPA/accountant/tax adviser and/or your attorney for advice concerning your particular circumstances.

2016-31892 Exp. 12/18

By Elozor M. Preil


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