Drop Dead Deadlines 12/10/2006

Drop Dead Deadlines 12/10/2006

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC
Drop Dead Deadlines 12/10/2006

Drop Dead Deadlines

“Drop Dead Deadlines”



Whether you plan to establish a retirement plan, grab some last minute tax deductions or make gifts to charities, you’ll want to make sure to meet the required December 31 deadline for these strategies: 


Retirement Planning.  

·        If you are a business owner planning to set up and fund a qualified retirement plan (401-k, profit sharing, defined benefit plan, etc.) for 2006, you must sign your plan documents before year-end.  You have until the date you file your tax return, including extensions, to make your contribution.

·        If you are age 70 ½ or older, you can contribute up to $100,000 directly from your IRA account to a qualified charity.

·        If you are subject to Required Minimum Distributions from your retirement funds, you have until December 31st to take your distribution and avoid a 50% penalty.


Tax & Miscellaneous Planning. 

·        If you make your January home mortgage payment by December 31st, you can deduct the interest on this year’s return.

·        Your state income taxes must be paid by January 15th, 2007.  If you pay them by December 31st, 2006, you can deduct the payment on your Federal tax return this year. 

·        By selling securities with losses this year, those losses can be used to offset realized gains plus excess losses over gains can be used to offset up to $3,000 of ordinary income. 

·        You are allowed to change your Medicare Part D provider once per year but you must make your change by December 31st for 2007.


Charitable Planning. 

·        If you make a gift of cash to a qualified charity, you need to do so by December 31st.  You must have a receipt from the charity in order to receive a tax deduction.

·        Your ‘post mark’ determines the date of the deduction for gifts made by check.

·        For tax deduction purposes, the transfer is not considered completed until the stock is deposited into the charity’s brokerage account.  Transfers of stock can take several weeks so you will want to start the process now. If you want the deduction this year but have not decided what charities you would like to give to, consider setting up a Donor Advised Fund with The Community Foundation of Greater Birmingham (phone 328-8641).  You’ll receive a deduction for 2006 but you will be able to designate the charities at a later date.

·        “Charging” your charitable donation makes sense if you use a credit card that offers airline mileage or similar incentives.  Your deduction will be based on the date the charge is made even though you may not pay your bill until next year. 


As a general rule, you must receive a receipt from the charity no later than April 15th, 2007 for any donations you make for $250 or more during this calendar year. 


No doubt you’re busy this time of year but spending a little time and effort on these tax matters can save you money come tax-filing time.