Five Tax Moves to Make Before Year-End
Effective year-end tax planning involves more than just filing your return. It requires reviewing recent IRS updates and adjusting your strategy to align with current rules. For Florida residents, this means paying attention to federal changes that directly impact your bottom line and future security.
This roundup highlights five specific areas to address before the year ends. From correcting IRA errors to preparing for new filing systems, these steps help you avoid penalties and optimize your financial position. Each item below explains what changed and what you should do next.
Maximizing Education Savings Strategies
Families often look to maximize contributions to education savings plans during the year. While specific contribution limits vary by plan type and state, the concept of bunching gifts can be a useful strategy. This involves contributing multiple years' worth of gifts in a single year to take advantage of gift tax exclusions.
However, you must ensure these contributions comply with current federal gift tax laws. The IRS does not provide a single universal limit for all education plans, so the exact amount you can contribute depends on the specific plan rules and your overall gift tax situation. It is important to review your plan documents to understand the annual contribution limits and any catch-up provisions.
If you are considering a large lump-sum contribution, consult with a tax professional. They can help you determine if bunching is appropriate for your financial situation and ensure you do not exceed applicable gift tax thresholds. Proper documentation is essential to support any large contributions made in a single year.
Understanding the New IRA Compliance Resolution System
The IRS has established the IRA Compliance Resolution System (ICRS) to help correct certain errors in individual retirement accounts. This new program, outlined in Revenue Procedure 2026-33, allows IRA custodians and owners to fix inadvertent failures caused by service-provider errors. It simplifies the process of maintaining tax-qualified status for your IRA.
Previously, correcting certain errors required complex private letter ruling requests. Under ICRS, eligible errors can be corrected through a streamlined process. The system also provides a pathway for waiving the 60-day rollover requirement in specific circumstances. This is a significant change for individuals who may have missed a rollover deadline due to custodian issues.
If you have experienced an error with your IRA, review the eligibility criteria in the revenue procedure. You can find more details on Correcting plan Errors and Individual Retirement Arrangements (IRAs). Acting quickly can help you resolve issues before they become more complex.
Preparing for the FIRE System Transition to IRIS
Businesses that file information returns must transition from the Filing Information Returns Electronically (FIRE) system to the Information Returns Intake System (IRIS). The final deadline to file test information returns through the FIRE Trading Partner Test System is November 1, 2026. After this date, the FIRE system will no longer accept new filings.
The last day to file information returns through the FIRE system is November 19, 2026, at 3 p.m. ET. Beginning in January 2027, IRIS will be the only electronic filing system for information returns. This includes current-year returns, prior-year returns, and corrections. Failure to transition in time could result in filing delays and compliance issues for the 2027 filing season.
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Visit IRS.gov/iris for resources to help with the transition. Ensure your software is updated and that you have completed any necessary testing. If you use a tax professional, confirm they are ready to file through IRIS. This transition is critical for any business that issues 1099s or other information returns.
| Deadline | Action |
|---|---|
| November 1, 2026 | Last day to file test information returns through FIRE |
| November 19, 2026 | Last day to file information returns through FIRE |
| January 2027 | IRIS becomes the only electronic filing system |
How Retirement Income Affects Your Taxes
Retirement income is not taxed uniformly. Pensions and annuities may be fully or partially taxable depending on how the plan was funded. Social Security benefits may also be taxable based on your filing status and other income. Understanding these distinctions is key to avoiding surprises in your tax bill.
You can use the IRS Interactive Tax Assistant to determine if your Social Security benefits are taxable. Additionally, distributions from traditional IRAs are generally taxable, while qualified Roth distributions are tax-free. This difference can significantly impact your overall tax liability.
Newly retired individuals should review their withholding. You can request federal income tax withholding from pensions, annuities, and Social Security payments. However, this may not be enough to cover your total tax obligation. Use the IRS Tax Withholding Estimator to adjust your withholding or make estimated tax payments if necessary.
Year-End Tax Planning and New Credits
The Education Freedom Tax Credit is a new nonrefundable credit for cash donations to qualifying K-12 scholarship-granting organizations. This credit is effective for 2027 returns. It allows taxpayers to claim a credit for contributions that help cover educational expenses such as tuition and tutoring.
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States must elect to participate and identify eligible organizations. Taxpayers can contribute to qualifying organizations regardless of their state of residence. The credit amount and specific eligibility criteria are detailed in the proposed regulations. Reviewing these rules now can help you plan your charitable giving for the upcoming year.
For more information, see the proposed regulations for the new Education Freedom Tax Credit. This credit represents a new opportunity for families to support education while receiving a tax benefit. Ensure your donations are made to eligible organizations to maximize this benefit.
How SK Financial can help
Navigating these changes can be complex, especially when multiple rules intersect. At SK Financial CPA, we help Florida small-business owners and individuals stay compliant and make informed decisions. Our team stays up-to-date with the latest IRS guidance to ensure you are prepared for any changes.
If you have questions about your IRA, information return filings, or retirement income, contact us to book a consultation. We can review your specific situation and help you develop a strategy that fits your goals. Visit our solutions page to learn more about how we can assist with your tax planning needs.
Frequently asked questions
What is the IRA Compliance Resolution System?
The IRA Compliance Resolution System (ICRS) is a new IRS program that allows correction of certain inadvertent errors in IRAs. It simplifies the process for fixing issues caused by custodian or service-provider errors. This helps maintain the tax-qualified status of your IRA.
When does the FIRE system stop working?
The FIRE system will stop accepting new information returns after November 19, 2026. The last day to file test returns is November 1, 2026. After January 2027, IRIS will be the only electronic filing system for information returns.
Is Social Security income always taxable?
No, Social Security benefits may be partially or fully taxable depending on your filing status and other income. You can use the IRS Interactive Tax Assistant to determine if your benefits are taxable. This tool helps you estimate your tax liability accurately.
What is the Education Freedom Tax Credit?
The Education Freedom Tax Credit is a nonrefundable credit for cash donations to qualifying K-12 scholarship-granting organizations. It is effective for 2027 returns. The credit helps offset the cost of educational expenses such as tuition and tutoring.
How can I adjust my tax withholding after retirement?
You can request federal income tax withholding from pensions, annuities, and Social Security payments. If this is not enough, you may need to make estimated tax payments. Use the IRS Tax Withholding Estimator to determine the right amount to withhold.
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This article is general information, not tax advice for your situation. Tax rules change and depend on your facts — talk to a CPA before acting on it.
