Start year strong with these moves

Crossing off tasks early a solid entry to 2021

After the train wreck that was 2020, you may well question whether it’s worth trying to plan anything. But knocking off a few financial tasks early in the year can better prepare you for whatever 2021 has in store.

File tax return ASAP

Filing your tax return early typically means getting your refund sooner. Not only that, it could thwart refund-stealing identity thieves. Also, If you were owed a stimulus check in 2020 but didn’t get one, or should have gotten more, you can claim the missing money on your return.

If you owe the IRS, it’s better to know sooner rather than later. You’ll have more time to find the money or arrange a payment plan.

Also, unemployment checks are generally taxable. Many people who received last year’s extended jobless benefits may face a larger-than-expected tax bill this year, tax experts say.

Check withholding

Once your 2020 tax return is prepared, use that and your first pay stub from 2021 to see if you’re on track with tax withholding. A good tax withholding calculator can help you determine how to adjust the amounts taken from each paycheck. Then, contact your employer if you need to make changes.

If you’re self-employed, you may need to make estimated quarterly payments. You could consult a tax professional to find out how much those should be.

Adjust retirement savings

Increase and diversifying retirement contributions. After you take full advantage of available company match in a 401(k) or 403( b), look into funding a Roth IRA. If your income is too high to make a direct Roth contribution — the ability to contribute starts to phase out at modified adjusted gross income of $140,000 for singles and $208,000 for married filing jointly — consider converting a portion of a traditional IRA.

Set up savings ‘buckets’

Preparing for irregular but predictable expenses. These can include insurance premiums, property taxes, car and home repairs, vacations, back-to-school shopping and holidays.

Once you have your savings goals for each category, consider setting up separate savings accounts at an online bank that doesn’t charge monthly fees. You can divide the amounts by the number of paychecks you’ll get before the money is needed, and set up automatic transfers from your checking account to the appropriate savings account after each payday.

Spend medical FSA

Flexible spending accounts are employer-provided benefits that allow you to put aside tax-free money for medical or child care expenses.

If you signed up for your employer’s medical FSA, spend that money as early in the year as possible. You don’t risk leaving money in the account and losing it.

Incurring expenses early can help you meet insurance deductibles, too, so the rest of your health care costs less. Also, if you leave your job during the year, you don’t have to finish making FSA contributions. So, you can spend the full amount you had planned to contribute, up to $2,750, without having to contribute the full amount.