9 Financial Moves To Avoid Before the New Year

While it’s true that many companies won’t delay the year-end bonus until the following year, it’s worth asking because the worst they can say is no, he says.

3. Don’t spend money you don’t have. While retired folks, in particular, might like to give generously to kids and grandkids at holiday time, don’t give or purchase anything that you can’t pay off within a few months, says Crystal McKeon, a certified financial planner in Houston.

“While the gift may give someone else joy, you don’t want to give yourself heartache,” McKeon says. Instead of giving a costly gift, she suggests, perhaps you can enjoy the same good feelings by planning some sort of special shared experience that doesn’t cost nearly as much.

4. Don’t get divorced in December. Instead, for the best tax filing outcome, it’s usually best to wait until January, says Sara Stolberg Berkowicz, a certified financial planner in Skokie, Illinois.

She knows this very personally because that was the advice she received — and heeded — two decades ago when she divorced. After all, married couples typically receive better breaks on their taxes, and their filing status is determined on Dec. 31. So, for example, if your divorce is finalized on Dec. 30, your tax status for the entire year will be single — not married — even though you were married for 99 percent of it.

“When you file for divorce can make thousands of dollars of difference in taxes,” Berkowicz says. “You should consider taxes as a determining factor for the day your divorce is signed by the judge.”

5. Don’t pay all bills exactly when they are due. For example, many folks have property taxes due or want to give sizable charitable donations at the end of the year. You might, instead, choose to make two property tax payments (or two “annual” charitable deductions) in one year, Berkowicz suggests. 

This way, instead of receiving the standard deduction, if you bunch the payments into one year you might qualify for a more tax-advantageous itemized deduction. That’s ending the year tax-smart.

6. Don’t let unused services follow you into 2024. Use the end of the year as a reminder to review your recurring bills and make certain that you are using all of the services for which you’re paying, McKeon says.

This includes everything from cable TV to streaming services to magazine subscriptions to monthly delivery clubs for everything from wine to razor blades. There might also be annual — not monthly — recurring services (such as auto clubs) that you might want to review as well, she says. Remember, a service is a financial burden — not a service — if you don’t use it.

7. Don’t forget to take your required minimum distributions (RMDs). The actual age for RMDs seems to be a moving target. In 2023, the federal government raised the age at which you must begin taking RMDs to the year after you turn 73.

If you fail to take the RMD — and the IRS catches you — it can penalize you up to 50 percent of the value of the distribution. “It’s really crazy that the IRS charges that high a fee,” says McKeon, so it’s critical to remember to take the distributions.

If you forget to take your RMD, says Sullivan, make sure you correct it in a timely manner. Withdraw the required funds as quickly as possible and file Form 5239. If you correct your mistake, the penalty is 25 percent, and possibly as low as 10 percent (or even nothing) if you file for an appropriate waiver and gain IRS approval, Sullivan says.

8. Don’t buy mutual funds in December. If you purchase mutual funds in December, there’s a good chance you’ll be on the hook for a capital gains tax payout for 2023, notes Balcom. If you buy today and get a capital gains distribution next week, you’ll owe taxes on money you didn’t earn.

“Even a lot of financial advisers don’t pay attention to this,” he says. It only takes a few minutes to go to the mutual fund’s website and find out when the capital gains distributions are paid annually.

9. Don’t forget to choose the appropriate tax filing status. This might sound simple, but there can be a more nuanced approach, says Sullivan. Your filing status is determined by your status as of the last day of the year. If your marital status has changed or one of your kids has aged out and there’s a change in the number of dependents in your family, you want to make certain that’s clear on your tax form.