West Group, PC

2024 is coming to a close. That means it’s the perfect time to get set up for tax season success and, hopefully, reduce your tax liability. Whether you’re an individual or a business owner, a little planning now can save you money—and headaches—come April. Here’s a checklist of essential year-end financial moves to close out the year (and start 2025 on the right financial foot).

FOR INDIVIDUALS 

• Review spending and make a budget. Evaluate where your money went this year and set a monthly budget for 2025. You may need to make adjustments during the year as certain expenses increase. Any money not spent should go into savings. 

• Check progress on paying down debt. If you’ve made steady progress on paying down debt, congratulations! If not, look for additional sources of income and put that money toward your debt. If possible, see where you can curb spending and move that money toward paying down debt. 

• Review savings and set a plan. Focus on increasing your savings by setting goals and putting them into action. Increase your 401(k) contributions, set up direct deposit from your paycheck into a dedicated savings account and arrange for automatic transfers. 

• Contribute to your retirement accounts. If you plan to max out your 401(k) or other retirement contributions for the year, December 31 is the last chance to do so. For the 2024 tax year, the maximum 401(k) contribution is $23,000, plus an additional $7,500 if you’re 50 or over. For other retirement accounts, confirm your contribution limits and contribute what you can. 

• Review and adjust withholdings. Check your tax withholdings to avoid a surprise bill or refund. Be sure to adjust your W-4 or make estimated tax payments if you’ve had changes in your income this year or significant life changes, like marriage, a new job or a large bonus. 

• Harvest tax losses. If you have investment losses, then they can offset other investments’ gains and losses. If losses exceed gains, you can take $3,000 in losses in excess to reduce your overall income. However, the losses must be realized (i.e., you have to sell the stock) to qualify for the deduction, which must be done by December 29.

• Check your FSA balance. If you take advantage of a flexible spending account (FSA) from your employer, check your balance to see how much you have left to spend. These balances are “use it or lose it,” so be sure to spend them by December 31 to avoid forfeiting them.

• Review HSA contributions. If you have a high-deductible health plan, a health savings account (HSA) offers tax-deductible contributions and tax-free withdrawals for qualified medical expenses. The 2024 limits are $4,150 for individuals and $8,300 for families.

• Make charitable contributions. Consider making charitable contributions to qualified organizations by year-end for tax deductions, as they can reduce your taxable income. 

• Review estate planning documents. Review and update the beneficiaries on your retirement accounts, life insurance policies and wills. And ensure your estate plan reflects any major life changes (e.g., marriage, divorce, new children).

FOR BUSINESSES

• Organize and categorize expenses. Make sure all expenses are properly categorized for accurate tax reporting. Collect and organize any receipts and supporting documentation for deductions.

• Reconcile accounts. Reconcile your bank and credit card accounts by ensuring all transactions match your statements. Also, review accounts receivable and payable to ensure customer payments have been received and vendor payments are up to date. 

• Review financial statements. Assess profitability by reviewing income and expenses; check your assets, liabilities and equity to understand your financial health; and identify any cash flow gaps by reviewing your cash flow statement. 

• Assess tax liabilities. Estimate your total tax liability for the year and ensure you’ve made all necessary quarterly tax payments. If you’re behind, consider making catch-up payments to avoid penalties. Identify any available tax deductions and tax credits that could lower your taxable income. 

• Maximize retirement contributions. Review contributions to retirement plans for both you and your employees. And ensure that any employer contributions have been made before the year ends. 

• Review payroll and benefits. Start preparing year-end tax forms, such as W-2s and 1099s, for employees and contractors. Make sure payroll records are accurate and that any bonuses or incentives have been properly recorded. 

• Conduct an inventory check. If your business holds inventory, conduct a year-end count to ensure accurate reporting. Write off any damaged or obsolete inventory items that are no longer useful. 

• Evaluate insurance coverage. Review your business insurance policies to ensure you have the coverage you need. This includes general liability, professional liability and worker’s compensation. Make any necessary adjustments to ensure you’re protected for the next year. 

• Plan next year’s budget. Use this year’s data to project next year’s revenue, expenses and cash flow. Set financial goals for the upcoming year and adjust your budget to reflect those goals. 

• Meet with your accountant or financial advisor. Schedule a meeting with your accountant to review your year-end finances and talk about any applicable tax strategies. This is also a good opportunity to assess any potential risks and make sure you’re taking advantage of all available tax-saving options.

Take action now

Set yourself up for a streamlined tax season and greater financial health by jumping on these checklists now. And if you’re ever in doubt, lean on your accountant or financial advisor for help.