There are a number of things you can do to potentially help save you thousands of dollars on your 2020 tax return.

Remember these year-end retirement account deadlines:

Contribute to your 401(k) plan by Dec. 31.
Retirees can skip required minimum distributions for 2020.
Take coronavirus expense withdrawals by the end of the year.
Donate your IRA distribution to charity.
Qualify for the saver’s credit.
More time for IRA contributions.

Here’s how to maximize the value of your retirement accounts before the end of the year.

Meet the 401(k) Contribution Deadline

Deposits to your 401(k) plan are typically due by the end of the calendar year. However, many people contribute to 401(k) plans via payroll withholding, and it might take your company a pay period or two to process the change. The 401 (k) contribution limit for 2020 is $19,500. Those 50 and older are eligible to deposit an additional $6,500 catch-up contribution for a maximum possible deposit of $26,000. Boosting your 401 (k) contributions could significantly decrease your 2020 tax bill.

Skip Required Minimum Distributions

Distributions from 401(k) plans and traditional IRAs usually must be taken by Dec. 31 each year after age 72. The penalty for missing a required minimum distribution is 50% of the amount that should have been withdrawn in addition to regular income tax on the distribution. However, those who don’t need the funds can skip their 2020 required minimum distribution due to provisions of the CARES Act.

Take Distributions for Coronavirus Costs

Retirement savers can withdraw up to $100,000 from a 401(k) or IRA to pay for coronavirus expenses until Dec. 31, 2020, without having to pay the usual 10% early withdrawal penalty. These emergency retirement account withdrawals are permitted for those who are diagnosed with COVID-19, have a spouse or dependent who tests positive or who have experienced financial problems as a result of being quarantined, laid off, working fewer hours or a lack of child care due to the pandemic. Income tax will be due on hardship withdrawals from tax-deferred accounts and can be paid over a three-year period.

Donate Your IRA Distribution to Charity

Owners of IRA’s who are age 70 ½ or older can avoid paying income tax on part or all of their required distribution if they directly transfer an IRA withdrawal to a qualifying charity. An IRA charitable contribution of up to $100,000 can also be used to satisfy the minimum distribution requirement.

Qualify for the Saver’s Credit

If your adjusted gross income is less than $32,500 as an individual, $48,750 as a head of household or $65,000 as part of a married couple in 2020 and you contribute to a retirement account, you might be able to qualify for the saver’s credit. This tax credit is worth 10%, 20% or 50% of retirement account contributions of up to $2,000 for individuals and $4,000 for couples, with the exact amount of the credit depending on your income.

More Time for IRA Contributions

While 401(k) contributions are generally due by the end of the calendar year, you have until April 15, 2021, to make an IRA contribution that will qualify you for a tax deduction on your 2020 return. You can contribute to an IRA shortly before filing your taxes to get a nearly immediate reduction in your tax bill.

Now is the time to come in and talk with Coach Pete and his team of trusted fiduciaries to make sure you are taking advantage of all these year end deadlines and not missing anything that could potentially cost you thousands of dollars!

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