Close this search box.

6 Tips for Midyear Tax Maintenance

Alyssa Reed, CPA

Sr. Tax Advisor


6 tips compiled by a Senior Tax Advisor for year-round tax health.

Couple at desk talking to tax advisor

Your list of annual checkups probably includes visits to a doctor, a dentist, and an automobile mechanic, but it may not include a visit with your tax advisor outside of March or April. Holistic health spans emotional, physical, and financial wellness. While it’s common to have checkups for one’s physical and emotional health throughout the year, why not fine-tune your financial health in the same way?

Performing a midyear tax checkup can ensure better finances—and preparedness—when tax time arrives. Senior Tax Advisor Alyssa Reed put together a list of six tax-checkup items that can help you cultivate year-round holistic wellness.


Giving to charity? Consider a qualified charitable distribution (QCD)

The standard deduction in 2023 is $13,850 for a single person and $27,700 for a married couple. Itemized deductions—which can include taxes, charitable contributions, mortgage interest, and very limited medical expenses—are an alternative to the standard deduction. If you don’t have $13,850 (single) or $27,700 (married) in itemized expenses, you can take the standard deduction. Donating to a charitable organization without itemizing (standard deduction) provides no tax benefit. However, nonitemizers may reap some tax benefits by making a charitable donation through a QCD, which gives part of a retirement distribution directly to the charity of your choice. While it won’t count as an itemized deduction, it does lower your taxable income. Your tax advisor can discuss the requirements that are unique to your situation.


Unexpected income? Check withholding or estimated tax payments

Your income may be substantially more now than it was in 2022 due to stock sales, larger retirement distributions, or better business revenue. Having more income is great, but paying more in taxes isn’t. Touch base now with your tax advisor to avoid a larger tax bill and/or penalties at the end of the year, to ensure your W-2 has substantial withholding to cover any increase in income, and to estimate quarterly taxes  and reduce penalties and taxes for next year’s return.


Saving for retirement? Consider a “backdoor” Roth IRA

A Roth individual retirement account (IRA) is a superior savings vehicle compared with a traditional IRA. Depositing money in a Roth IRA doesn’t entitle the account owner to a tax deduction, but growth in the account is distributed tax-free. The ability to contribute to a Roth IRA is phased out for high-income taxpayers (starting at $153,000 for a single person and $218,000 for a married couple). One can work around these income limitations, however, by making a nondeductible contribution to a traditional IRA and then rolling over the account to a “backdoor” Roth account. This allows even higher-income earners to benefit from tax-free growth.


Retiring? Take the required minimum distribution (RMD)

If you’re 72½ or older, you must take an RMD from your IRA. The amount is calculated based on your age, the account value, and IRS tables. Failure to take an RMD can result in steep penalties (up to 25%), so be sure to speak with your advisor about the requirements.


Flexible spending accounts (FSAs): Use ’em or lose ’em!

Most FSAs are required to be used by the end of the tax year or the balance is forfeited. Many everyday medical expenses—such as bandages, contact lenses, pain relievers, and even sunscreen—are FSA eligible. Purchase these products now to draw down your account balance and avoid losing funds at year-end. If you have questions about how to use an FSA or which expenses qualify, ask the benefits coordinator at your company.


Use 529 plans to save for education

Because post-secondary education is so expensive, consider contributing to a 529 plan if you have children or grandchildren. The contributions aren’t tax-deductible at the federal level, but your investments and gains can be distributed tax-free for any educational expense. Some states do permit a deduction, so check with your accountant regarding the specifics for your region. These contributions can remove assets from your estate, with the added benefit of tax-free account growth. Parents and grandparents can maximize the annual gift exclusion ($17,000 per donor, per beneficiary) by setting up 529 plans for multiple children and grandchildren.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.