Many considered Dec. 31, 2013, the final date for year-end tax planning, but there are numerous planning actions that you can take in 2014 retroactive to 2013. Here’s a quick and easy guide to help you with your planning.
Retirement Plans
Conventional and Roth IRA contributions for 2013 can be made until the April 15 return due date for the payment to be attributed to 2013.
Contributions for Keogh, SIMPLE and 401(k) can be made up until the due date of the return including extensions. However, the Keogh, SIMPLE and 401(k) plans must have been established before the end of 2013 (Sept. 30 for SIMPLE plans), unlike the IRAs.
SEP plans can be opened any time in 2014 until the tax return due date, including extensions, and/or payment delayed until then for the 2013 deduction to be allowed.
Stock Sales
Wash sales occur when stock sold at a loss is reacquired within 30 days before or after the stock’s sale. For sales made in December 2013 that had a loss, repurchasing the stock this month (within the 30-day prohibited period) will cause the 2013 loss to be disallowed and added to the basis of the January 2014 purchased shares.
Estimated Tax
The final estimated tax installment is due Jan. 15; however, if that installment isn’t paid but the return is filed and the full tax is paid by Jan. 31 there will be no penalty for underpaying that installment.
Trusts, Estates and Foundations
Distributions from trusts and estates that are made within 65 days after the end of the year can be attributed to 2013 if the appropriate box is checked on Form 1041 when the return is filed for 2013.
Private charitable foundations can make distributions related to 2013 income until the end of 2014.
Grantor trusts that mistakenly obtained a taxpayer identification number can notify their banks, brokers and others of the future use of the grantor’s Social Security Number and the discontinuance of the TIN eliminating the need to continue filing trust tax returns.
Estates for people dying in 2013 can elect the six months later alternate valuation date on a timely filed estate tax return.
Qualified disclaimers can be made within nine months of death for people that died in 2013, as long as the funds were not distributed or otherwise used by the beneficiary.
Estates can make many elections retroactively on the estate tax returns up until the return’s due date.
Business Issues
C corporations and personal holding companies, or PHCs, that pay dividends by March 15, 2014 can elect to have those dividends attributed to 2013 in order to avoid the imposition of the accumulated earnings penalty or PHC tax.
Businesses that want to claim inventory devaluations of regular for sale items should consider 2014 sales at the reduced amounts prior to the filing of the 2013 tax return that will report the write downs.
Businesses with a 2013 installment sale can elect out of the installment treatment if their 2013 tax bracket will be much lower than 2014 and later years are expected to be. This decision can be made before you file your 2013 tax return.
Last in first out, or LIFO, inventory valuation conversions can be done until due date of the 2013 tax return.
People who had informal partnerships and joint ventures in 2013 should consider filing partnership tax returns and issuing K-1s to report those activities. Formal partnership agreements are not necessary to have a valid partnership for tax purposes.
Employee Issues
Cafeteria plans and flexible spending accounts can make payments and reimbursements for 2013 salary-reduction amounts or applicable expenses incurred and paid through March 15, 2014 if the plan permits it.
Compensation is generally reported when received or made available to the recipient; however, if it is paid by check and the delivery of the check is delayed or otherwise not made available for collection, then the income does not need to be reported until the payment is actually received. For example, if a commission check is written at the end of 2013 and mailed to the payee while the payee is traveling or on vacation until January, then the payee will not have to report the income until 2014 (the year of actual receipt) even though his or her Form 1099 would show the 2013 payment. If this is the case, appropriate disclosure must be made on the 2013 tax return explaining why the Form 1099 amount is greater than the amount reported. Alternatively you can report the entire amount on the 1099 and on a different line on the return show a subtraction for the amount not actually received, and provide an explanation. Note that if the funds had been wired into the payee’s account by Dec. 31, it would be considered received because if they wished to withdraw it at that point, they could have.
Credit card charges made in 2013 for deductible items are reportable on the 2013 tax return even though not paid until 2014 or later.
Certain employer payments for deferred compensation plans are deductible in 2013 even if they are not paid until 2014, as long as they are paid by March 15, 2014. In such a case, the employee would report the income when received.
An employee who received employer-granted restricted stock or ISOs in December 2013 can make an election within 30 days after receiving the stock to report the income or AMT in the year the stock or ISO was received rather than when the restrictions lapse. This election is made pursuant to Internal Revenue Code Section 83(b). A timely January election will have the income taxed on the 2013 tax return.
Receipts for 2013 charitable contributions must be received by April 15, 2014 for such deductions to be allowable. If qualified appraisals are necessary, they must be attached to the returns. The receipts and appraisals can be prepared in 2014 for the 2013 contributions.
The above are some items where post-2013 planning can affect the 2013 tax return. Many of these steps involve technical issues and a professional tax advisor should be consulted prior to acting upon them. Some of these actions will need to be done right away, while others allow some time.
Edward Mendlowitz, CPA, is a partner in
