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Last-minute Tax Tips

It’s just about time to dive in and get your taxes done (or see if your accountant has a last-minute appointment!), so we wanted to take some time to give you a few last-minute tips for your 2020 taxes.

First, it’s not too late to make your 2020 contribution to your traditional or Roth IRA, or set one up if you don’t already have one. If you have questions regarding income qualification or disqualification (and your aforementioned accountant is already braindead from tax season), we’re happy to help you.

Speaking of Roth IRAs, if you have a child who is a minor but had some earned income in 2020, it may make sense to set up a Roth for them. Kids can get a jump on things and start saving with this type of account. They’re allowed to fund up to what income they earned, which can be a great way to reap the benefits of early investing. The next greatest gift after the gift of your time may be a Roth IRA while your children are still young. Let’s discuss the advantages and disadvantages of this opportunity to see if it makes sense for your child. It can help get them on the path to a solid financial future.

If you were affected by Covid-19, make sure to talk to your accountant about your options if you had to take any early withdrawals from your retirement accounts. The CARES Act allows some options for folks in this situation.

This time of year is also when we field a lot of questions about funding a 529 college savings account prior to filing your taxes. Although Kentucky does not allow for this tax credit, many states do, so make sure you know your state’s rules.

Lastly, if you have any self-employed income that you don’t need to spend, you might be eligible for a SEP IRA even if you have a 401(k). Keep in mind that a SEP IRA must be established by your company’s tax filing deadline, plus any extensions, for the tax year to which the qualifying contribution is made if you’re self-employed or own a small business. 

Keep in mind that Family Financial Partners does not provide tax advice. Please consult with your tax professional for additional guidance regarding tax-related matters. If you have questions, feel free to give us a call and our team will be happy to address them if we can, or provide a referral to a tax professional should you need one.

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