Procrastination is easy, especially when it comes to tax planning.

There have been many tax changes in 2020. Despite past, present and future changes to the tax rules, some year-end tax-planning advice remains unwavering. Here are a few time-tested suggestions, along with practical tips on the new tax laws passed earlier this year.

We hope these will help jumpstart your year-end review.

1. Make Adjustments to Withholdings, Estimated Payments, and Income Collection

If you haven't already, update your withholdings and estimated tax payments to reflect any changes needed since last year. Updates may be in order if you experience a big life event, such as marriage, divorce or a new job. Overpaying your 2020 tax reduces the cash you have on hand throughout the year, and underpaying can lead to penalties and interest.

What You Need to Do:

1. Prepare a Form W-4, and do a paycheck checkup to make sure income tax withholdings are accurate.

2. To the extent possible, think about deferring income and accelerating deductions and expenses to reduce tax liability for 2020. See if a year-end bonus can be paid in the 2021 and hold off exercising incentive stock options until after year-end.
   
   

2. Maximize Retirement Plan Contributions

You've heard this advice many times, because it's one of the best strategies for saving tax dollars, especially when wages are your primary source of income.

When inflation adjustments kicked in at the beginning of the year, did you boost your retirement plan contributions? If not, you still have time now to increase your contributions over the remainder of 2020.

• Elective deferrals for 401(k) and equivalent: Contributions can be deducted and the earnings on the contributions grow tax free until the money is distributed from the plan. Sometimes, the employer even provides matching funds, which is essentially extra pay to you. So boost pre-tax contributions prior to year-end to reduce your income.
  

• IRA plans:: Contributions to traditional IRAs are deductible, and the earnings grow tax free until the money is distributed. Contributions to Roth IRAs are not deductible, but the earnings and distributions are fully tax-free. Contributions to these retirement plans can be made up until the due date of the tax return, which is April 15 of next year.

What You Need to Do:

For 2020, you can deposit up to $19,500 in your 401(k), $13,500 into SIMPLE, or $6,000 into your IRA. If you're 50 or older, with additional catch-up contributions you can contribute a maximum of $26,000, $20,000, and $7,000. (The catch-up limitations are $6,500, $6,500, and $1,000, respectively.)

You can contribute to both a 401(k) and an IRA, though tax deductibility on IRA contributions may be limited, depending on your income.

Can't manage the entire amount? Try to contribute enough to take full advantage of any matching contributions offered by your employer. Again, this is essentially extra pay you can get.

Only in 2020 - No age limit for contributing to IRAs.

You can now contribute to an IRA regardless of your age as long as you have earned income. The old rule prevented you from contributing to an IRA past age 70½. The IRA contribution limit for 2020 is $6,000 if you're under age 50 and $7,000 if you're age 50 and over.

Consider getting a part-time job or doing some consulting work now if you won't have earned income by the end of 2020. You can then use this earned income to fund your traditional or Roth IRA.

3. Be Tax Smart with Retirement Distribution

If you need to withdraw money from a retirement plan and have some flexibility, work with a tax advisor to figure out the more favorable tax impact of taking the distributions this year, next year or by spreading them over two years.

Keep in mind, even if you don't have required minimum distributions yet, removing a planned amount from your retirement accounts each year may be more tax efficient than waiting until you are required to do so.

What You Need to Do:

1. Take your required minimum distribution. If you're required to take distributions from your retirement plan, do so by Dec. 31st or you face a 50 percent penalty. If you just turned 70½ this year, you could wait until April 1, 2021, to take a first distribution.

2. Consider charitable contributions. If you're age 70½ or older and hold an IRA account, you may be able to benefit by making a qualified charitable distribution to possibly reduce your above-the-line income. In addition, with a donor-advised fund, you receive an immediate tax deduction and a right to recommend grants from the fund over time.

Only in 2020 - Use retirement savings to pay for birth or adoption expenses.

Adding a child to your family is very expensive. To help with these costs, you can now cash out up to $5,000 per parent from your retirement accounts to pay for birth and/or adoption expenses. While the withdrawal won't be hit with the 10% early withdrawal penalty, you'll still have to pay income taxes.

Consult your financial advisor or benefits coordinator to find out how to withdraw the funds from your retirement accounts. Since this withdrawal will deplete your retirement savings, first consider whether you have other sources of cash to cover expenses.

4. Deploy a Gift-Giving Strategy

It's time to work on your 2020 gifting plan if you haven't started yet. As you plan, remember you can make gifts up to $15,000 in 2020 as a single person, or $30,000 as a couple, to any number of recipients without having to pay gift tax or file a gift tax return. This could include gifts of cash or property, including investments.

If you decide to gift money to a child or grandchild for education expenses, the $15,000-per-person annual gift limitation does not apply if a payment is made directly to a qualifying educational institution. Not only are gift tax limitations removed, making substantial education payments in this manner could also reduce your taxable estate - ultimately reducing your exposure to estate taxes.

Don't forget that your direct education gift can be for a grandchild, niece, nephew or anybody else of any age, either related or unrelated.

What You Need to Do

Consider gifting direct education gifts to recipients who would benefit from your generosity.

5. Consider the New Kiddie Tax Rules

If your school-aged child works, recent changes to how their unearned income is taxed may mean you'll be dealing with higher tax rates. The tax is now based on the rates for estates and trusts instead of parents' top tax rate. So your child's unearned income tax rate gets much higher much sooner than in prior years when it could be taxed at parents' lower rates.

What You Need to Do

Be careful with transferring income-generating investments to your children. The best way to avoid a higher tax rate is to manage your child's unearned income at or below $2,200 for 2020.

We will continue with the next 6 tips for last-minute tax planning before year end in our next blog.

Stay tuned!