Start Tax Planning Early: 8 Great Year-End Tax Tips

Tax Planning New Year 2014 Concept

When you think of the holiday season, what comes to mind? Gift exchanges? Holiday parties? Home-baked pies? Taxes?

I know you have a lot of other things to do this time of year, but the holiday season is a great time to make some last-minute tax moves before the year is over. Here are eight of my favorites:

1.  Ask for a New Year’s Bonus Instead of a Christmas Bonus

By delaying your bonus by only a week, you can push the payment of taxes on the income 15 months into the future — a year from next April.

2.   Clean Out Your Closets and Donate to Charity

You can clean out the old clothes, sporting goods, books, and other household goods that you no longer use and welcome the New Year with new space in your life, and get a quick tax deduction to boot. Document these donations by making a list of the items at the time you donate them. You can use TurboTax It’s Deductible to accurately value your donated goods.

3.  Pay Donations by Credit Card

Payments made by credit card are deductible in the year they are charged, not the year they are paid, so you can donate to your favorite charity by December 31 and not pay the bill until next year.

4. Contribute the Maximum to Your 401(k) or 403(b) Retirement Plans

Some employers will allow you to catch up on contributions by increasing your deduction on your last paychecks of the year. If you are 50 or over, don’t forget that you can contribute an additional $5,500 “catch-up” contribution in addition to the regular 401(k) or 403(b) $17,500 limit for 2013.

5.  Check the Balance in Your Flexible Spending Account

A wonderful fringe benefit, these helpful plans allow you to set aside a portion of your salary before taxes for certain purposes, such as child care or health care expenses.

These plans did work on the “use it or lose it” concept: any amount unused at the end of the year was lost, however the Treasury and IRS modified the rule and now employees may be allowed to carry over $500 of unused amounts for next year’s expenses.  Your employer may also offer the existing plan option to use unused amounts for up to two and half months following year end.

6.  Bunch your Medical Bills

Medical expenses are only deductible when they exceed 10% of your adjusted gross income (still 7.5% if you are over 65). If your income is low this year or your medical expenses are high, speed up your deductions accordingly. If you want to take the deductions this year, pay any outstanding medical bills before year-end, stock up on prescriptions, get new glasses, and pay your health insurance premiums before the end of the year.

7.  Estimate Your Taxes

You can use TurboTax TaxCaster to estimate your taxes and see if you need to make any last minute tax moves.  The IRS treats income taxes withheld from your paycheck as if they were paid in equal amounts throughout the year. So if your calculations show you’ll owe money, you can increase the withholding on your last paychecks of the year to make up the difference.

You can also try the new TurboTax MyTaxGuru to see what you can do to get a bigger tax refund when you file your taxes.

8.  Don’t Forget to Gather Your Receipts

You can deduct union dues, legal and professional fees relating to tax and investment advice, and unreimbursed employee business expenses of mileage, equipment, education, and supplies, among other things. If you pay a lot of expenses for your job or your investments, gather up the receipts and cancelled checks so you can save more money when you file your 2013 taxes.

Comments (214) Leave your comment

  1. I had teeth extracted and implant set in November. Since I’ve reached the threshold for medical/dental itemized deductions I would like to include the rest of the process including dentures as a writeoff on this years taxes. Even though I won’t be receiving the denture until March of next year if I pre-pay by Dec 31 can I write it off this year?

  2. I would like to respond to Sunna’s question and comment about Flexible Spending. I have never experienced what you did with Flexible Spending. Something does not sound quite right, but you have until March of the following year to spend the money and then October of that year to actually file your claim for the money. e.i. 2013 claims can be filed until October 2014. You have until March 2014 to spend the money and the same for previous years, 2012 you have until 2013. I always fax my paperwork over. Only once did I have an issue they didn’t receive one of the papers and after some time past I called and then re-submitted. They can’t keep your money if you filed in a timely manner. I would try to re-submit with a letter stating when you first submitted the original one and those there after. I am sure you will get your money. Flexible Spending is a win win I wouldn’t stop using it because of this incident. It lowers your taxable income and you’ve got money set aside during the year to pay those out of pocket medical expenses. Good Luck!

  3. Our daughter is a single mom. We pay for her home, car, insurances, HOA, the grandson’s pre-school, clothing, groceries, etc. We let her claim him as her dependent. Can we claim anything on either of them? Thanks so much, D

    1. Dee,

      You are very generous.

      If your daughter’s home is in your name, you can deduct the interest and property taxes you pay. If it is in your daughter’s name, neither of you can claim the deduction – she can’t because she didn’t pay it, and you can’t because you didn’t own it.

      You would only be entitled to the medical insurance deduction or child care expenses if you claim them as dependents.
      HOA, car, clothing, groceries, etc are personal expenses, not deductible expenses for any taxpayer.

      Mary Ellen

  4. I just got married in April 2013. I am a teacher and pay my student loans based on my AGI. I heard that there is a penalty for filing married but separate is that true??? And if so what is amount of the penalty? By filing jointly will it affect by AGI for paying my student loans?

    1. Frank,

      You will need to weigh the increased income tax against the possible increased loan payment. You can prepare your tax return in TurboTax as two married filing separate returns and as a joint return to see what the tax expense is.

      If your loan repayment plan is impacted by your AGI, and your spouse does not have student loans, you could see an increase in your payment. You would need to discuss this with your lender.

      Mary Ellen

  5. In 2013 we had to foreclose on a piece of property that we were the private lender on since 2007. We have claimed interest earned over the years. My question is: we have had to put a lot of expense into getting the property and house into saleable shape. When we sell the property this year can we deduct all the expenses we had to pay and also write off the mileage incurred for this property?

    1. I forgot to ask on my previous question about the property taxes we had to pay in 2013. Will we be able to deduct those in 2013 since we received the property back thru a Sheriffs Deed?
      Our owner ship started on May 18 for the Manufactured Home and final deed for the land on Dec 18 (Idaho requires a 6 month right of redemption for land, the house was not considered real property at the time of foreclosure, we have since turned it into real property with the land)

    2. Jill,

      IRS publication 537 address repossessed property originally sold on an installment sale. You will need to report the gain or loss on the repossession. Based on that calculation, you will have a new basis in the property and the costs you incur to fix up the property for sale will be added to that basis and affect your gain or loss on the new sale.

      In general, you can deduct only taxes imposed on you. Since you did not own the property at the time of the payment, you cannot deduct the taxes as an itemized deduction for 2013. The property taxes you paid on the property can be added to the basis as a cost of the repossession.

      Mary Ellen

  6. My son whom is 19 pays child support for his daughter. Can he claim this on his taxes? The child is living with the mom who is stil in high school and lives with her parents. She is on social services. Can her mom claim the child?

  7. I believe I missed deducting my post-tax health insurance premiums paid a few years ago. Since that was paid post-tax, can I deduct that along with doctor co-pays? If so, what info do I need for documentation? Also, how many years back can taxes be amended? Thank you!

    1. RDP,

      Post-tax health insurance premiums are deductible as well as doctor co-pays. You should keep a copy of your insurance statement and the bills from the doctor for documentation.

      You can amend your personal tax returns for 3 years based on the later of the date filed or the original date due. If you filed your 2010 return by 4/15/2011, you must amend it before 4/15/2014 to claim a refund.

      Mary Ellen

  8. I paid my daughter’s college tuition in January of 2013. She graduated from college in May of 2013 at the age of 22. She lived with me in all of 2013 while working a part time job. In November 2013, she got a full time job but remained at home. Can I claim her as a dependant on my 2013 taxes? Also can I claim the tuition expense as I have in previous years if she is no longer considered a dependant? Thank you.

    1. Robert,
      If you can claim your daughter as a dependent, based on age, income, student status, etc, you can claim the tuition expense deduction or credit. If not, your daughter can claim it on her tax return.

      Mary Ellen

  9. I have a daughter who is a first year college student. At the end of 2013 she is 18 yrs old. she works part time and I believe she has made around $7500 for the year, if she files taxes can I still claim her as a dependent since I am paying for all of her college tuition and books, fees etc. What can I claim toward these expenses. I’m assuming with that amount that she does have to pay. I usually do my own taxes but am wondering if I can now that this is in the mix, my taxes are typically straight forward the whole education thing is confusing. Thank you in advance for any help you can provide.

    1. Irma,
      Don’t be afraid to use TurboTax to file your tax return. We will ask all the required questions about your daughter’s education expenses and claim the allowed amounts.

      As long as your daughter is a full-time student under the age of 23, you can claim her as a dependent regardless of her income.

      If you are claiming her as a dependent, she may not claim herself. She will have a small amount of tax to pay on $7500 of income.

      1. Mary Ellen,
        Thank you so much for your answer, I will certainly give it a try with turbo tax as I do not have money to pay someone to do them for me. And I really hope when you say small amount of tax, that it is small. 🙂 Thank you again for your help.

      2. Hi Mary Ellen,
        could you please tell me where I report the information from form 1098T on my 1040 taxes. Is it possible to file form 8917 and 8863 I find them both very confusing. Thanks in advance for your help.

  10. We sold our house in October of 2013. We are currently in the process of building a house. The money we received from the house sale will be used at closing on the new house loan in 2014. Will we be taxed on the money we made from the house sale since it will be going to the new loan?

    1. Connie,
      If you did not make a profit of more than $250,000 on the sale of your residence ($500,000 if you are filing a joint tax return), and you lived in the house as your primary residence for 2 out of the last 5 years, the profit on the sale of the house is not taxable.

      Mary Ellen

  11. i purchased a home in march of 2013 I live alone and work for a company from home they supply what I need but I pay for the internet . will I just file as I did when I lived in an apartment…?

  12. I added my domestic partner to my health benefits starting in January which will increase my payments by over $200 month, will this lower my taxes per paycheck and if so, by how much?

    1. Hi,
      If your employer deducts the medical insurance premiums before calculating your withholding (this is very common), then you will see a decrease in your withholding. Your FICA and MediCare taxes will decrease by a bit over $15 each month.
      Calculating your income tax withholding requires information about your filing status, the number of exemptions you claim, how often you are paid, and how much money you make, so it would not be possible to calculate that in this forum. The closest estimate is to multiply your tax rate by the premium amount. That should get you in the ballpark.

      Mary Ellen

      Mary Ellen

  13. My son is 19 years old, and lives with me. He earned appx $29k in 2013. In Dec. 2013 he enrolled into college as a full time student. I paid his tuition > $2,000.00. Because of his earnings for 2013, he will have to file taxes separately as independent. Because he will be filing taxes as independent, but since I paid his tuition – am I allowed to claim the tuition expense as a deduction on my tax return – or is it just lost? Thank you.

    1. Hi PC,
      The tuition deduction is only allowed for those people on the tax return, yourself, your spouse and your dependents. Since your son is not your dependent, you are not able to tax a deduction or a credit for his education expenses, however, you son may qualify for the deduction or credit on his own tax return, even though you paid the tuition.

      Mary Ellen

  14. Can you deduct the insurance premiums that are taken directly out of your check along with the out of pocket expenses incurred if you are planning to itemize your medical expenses this year because of an expensive surgery?

    1. Hi Amy,
      If premiums are deducted from your paycheck pre-tax then you would not be able to deduct them, because the amount deducted is not included in your taxable income. Your unreimbursed out of pocket expenses, however would be deductible.
      Thank you,
      Lisa Greene-Lewis

  15. Matt
    If someone say that they have put a lien on my social security number (or reported my s/s number to the IRS) what does that mean. The reason was a “cash loan store”. Not true, but just curious as to how that works. The loan was paid off.

    1. Matt,

      I don’t think I have ever heard the term “put a lien on my social security number”. Is it possible they mean to report the cash loan store to the credit bureaus?

      Mary Ellen

      1. No. They just said that they reported my name and my social security number to the IRS. Is there any reason a business can report for a lose to the IRS. I know that men that does not pay child support can enter the system with there pay being deducted, or not paying your own Tax.
        Thanks for the response.


    1. Terrianne,

      IRS should start accepting individual returns no later than February 4. TurboTax will be transmitting returns to IRS as soon as allowed.

      If you have more taxes withheld than you owe, you should receive a refund.

      I don’t understand your question about getting letters in the mail.

      Mary Ellen

  17. I want to give as a gift approximately $ 14,000.00 of GE stock to my granddaughter.( 2 years old) Do I have to pay taxes on the profit of the equity when I transfer the account to her name? How do I report that to the IRS?
    Thank you

    1. J.P.,
      You do not have to pay taxes on the profit before you transfer stock to your granddaughter. She will own the stock with the same basis you have before the transfer. If she sells the stock, she will have to pay tax on the profit at that time.
      You can transfer up to $14,000 per recipient per year starting 1/1/13 without the need to file a gift tax return.

  18. Hi…I will be 62 in 2015 & will be retiring. If Social Security will be my only source of income (estimated $1050.00 month), will I have to file taxes? will I have to pay taxes? Thank You.

    1. Linda,
      Under current tax rules, if your only income is social security, and your income does not exceed $25,000 if you are single, $32,000 if you are filing a joint tax return, you will not owe income tax and do not need to file a tax return.

  19. If I am assisting my adult children by paying some of their monthly bills (phone, electricity, auto insurance, etc.), can I claim this on my taxes – as a gift or otherwise – without having to actually claim them as a dependent? They simply do not make enough money to pay all of their bills and rather than apply for government assistance, I help them. Thank you.

    1. Loretta,
      If your doctor prescribed the tub for medical reasons, you can deduct the cost of the tub plus installation minus any increase in the fair market value of your home due to the tub and installation.
      For example, if the tub and installation cost $3,000, and the fair market value of your home increased $1,000, you could deduct $2,000 as a medical expense, provided that you have a prescription for the tub.
      If you do not have a prescription for the tub, you will have an increase in the cost of your home to deduct from the sales price of your home when you sell it in the future.

  20. This week my son’s furnace stopped working. He will now have to purchase a new furnace – high efficiency. Will he be able to deduct the cost on his turbo tax? The estimate is approximately $3,000. I had heard there could possibly be an $850 tax credit.

    1. William,
      Some furnaces will qualify for the energy credit, so be sure you have the manufacturer’s credit certification statement. It is usually available on the manufacturer’s website or with the product’s packaging. The amount of the credit varies with the type of equipment installed.The lifetime credit for Nonbusiness Energy Property such as the high-efficiency furnace cannot exceed $500 from 2006 to 2013.

    1. Copays that are not paid by a pre-tax medical spending account or flex-spending account are medical expenses and can be included as medical expenses in your itemized deductions.

      1. If I take the standard deductions for medical, will I be still able to add the co-pays as additional medical expenses?

      2. Doloris,
        The standard deduction is for all deductible expenses, not just medical. If you itemize deductions, you can add medical copays as part of the medical expense, but they will be reduced by 10% of adjusted gross income (7.5% if you or your spouse are 65 or older). They will not be an addition to the standard deduction. The standard deduction for a married filing joint return with both taxpayer ans spouse over 65 is $14,600.

  21. I received about$10,000 in a 3rd party settlement of a lawsuit that stemmed from a work injury. Do I claim it and if so how? They did not take taxes out of it. I am in new jersey

    1. Cyndi,
      Damages for personal physical injuries and physical sickness are tax-free. Damages for emotional distress are taxed unless the emotional distress is triggered by the physical injury. If your settlement includes both physical and emotional injury, the part attributable to the emotional injury will be taxable.
      Also, because the settlement was for a work injury, some of the settlement may be considered wages and would be taxable.
      You should receive a W-2 and/or a 1099 for any taxable settlement.

  22. My grandparents have passed away some years ago and I have been paying the proprty taxes, could this deductible? I do not live in the home.

  23. If My girlfriend lives with Me and started school Aug 26, 2013 in california and i pay for everything such as gas to and from school and supplies ect. Am i able to claim it on my taxes

  24. My 20 year old son moved back home after losing two jobs and being unable to pay his bills. For months I subsidized his living expenses and am now paying off his credit card debt. Is there any write off available for this or can I claim him as a dependent even though he worked for about half the year? So far I’m out about $8,500. Thanks in advance for any advice!

    1. Michael,
      If your son is not a full-time student, and earned more than $3,900, or provided more than half of his own support, you will not be able to claim him as a dependent.
      There is no tax deduction available for paying off someones bills, or subsidizing living expenses.

  25. My husband passed away in April & was on Social Security. I had retired last year but was not drawing Social Security until he passed away. Our only other income is from interest on checking accounts & some dividends earned on stocks that were in our IRA’s. He generally did our taxes. He passed away without a will & I filed a Small Estate Administration. What do you recommend for me to do this year for my tax preparation?

    1. Carolyn,
      I would suggest that you consult a tax professional for this year, to make sure the taxes are done correctly. A professional should be able to answer any questions you have about what income is taxable and what is not.

      In the future, you could prepare the returns yourself, using TurboTax, and following the professionally prepared return as a guide.

  26. I am caring for two elderly married adults in my home. I receive VA disability payments for the male but nothing for the female. He doesn’t have to file income tax, but I think I’m suppose to. I will appreciate any and all advice, including reading materials that you may suggest. Do I claim the disability income as personal income for me? Is there anything else I should consider claiming?
    Thank you,

    1. Hi Georgia,
      You should probably talk to a local tax professional about your situation to make sure you get everything set up correctly. I think that any advice given here would only cause you to have more questions.
      I will say that if you are taking the VA Disability to pay for the board and care of your couple, it is taxable income to you, but the expense of caring for them is deductible. You can look at for publications on business income and expense.
      Mary Ellen

    2. VA Disability is considered compensation and not income (therefore not taxed). But I don’t know if that changes when the recipient is not the vet. I would contact your local CVSO (County Veterans Service Officer) to answer that one. They should know the tax benefits or consequences of the veterans benefits.

  27. I was in a horse racing partnership for about 5K, The horse developed cancer (can u believe that?) and had to be put down before ever running a race. May i deduct any or all of my investment as long term capital gain? I do get a K1 form but hard to find that it Turbo Tax and it doesnt seem to change tax ata lll.Thanks

    1. Hi Charlie,
      Losses from partnerships may not be deductible in the year you sustain the loss if you do not actively participate in the business. If the partnership is dissolving this year, due to the loss of your horse, you can claim the deferred losses (TurboTax should have tracked that for you).
      Any remaining investment would be long term capital loss, reported like a stock sale.
      You should find the K-1 entry in Business Items.
      Mary Ellen

  28. I am self employed. I work from home. I use my vehicle. Due to a new business venture, my home office had to relocate. Also, for a short time I had another vehicle on a day lease contract. That venture was a total loss. How do I deduct all of this loss? I am even loosing the house, because I am not making enough to pay all of the rent. I am a widow, head of house hold, and I have a minor child.

    1. Hi,
      You are busy. The expense for the day lease is fully deductible as business expense (rent). You will have to calculate your business use of your personal vehicle based on business miles and total miles driven. Home office expense is only deductible if the office area is use exclusively for business (you don’t pay your personal bills, or help your kids with their homework in that area). Any expenses for supplies, advertising, development and the like are deducted on Schedule C, Business income and expense. TurboTax Home and Business has all the necessary forms, and asks all the questions about having a business and will be the best choice for preparing your 2013 tax return.

      Mary Ellen

  29. My adult unmarried child died this year. Do I sign the return for her refund on federal and state? I know I have to file Form 1310 for federal, but what for state?

    1. Hi Mia,
      I am sorry for your loss.
      Yes, you should sign her tax returns as the executor, or appointed representative.
      If you complete the 1310 for the IRS, TurboTax will include the appropriate forms with the state income tax return.
      Mary Ellen

  30. I pay a 1% annual fee to an investment banker (FTJ fund Choice) on my 401K that I rolled over to an IRA, I am 72 years old.

    1. Hi Hugh,
      If you are asking if you can deduct the 1% fee on your IRA, the answer is yes. The fee is a miscellaneous itemized deduction, reduced by 2% of your adjusted gross income.
      Age is not a factor in determining this deduction.
      Mary Ellen

  31. Last year I made a Qualified Charitable Deduction from my IRA and got a letter from the IRS demanding additional taxes. It took a while to straighten it out because there was no field in TurboTax to state that some of the money I took from my IRA went directly to charity. Is TurboTax for 2013 filing going to include such a field?

    1. Bob,
      The provision allowing the Qualified Charitable Deduction for contributions made directly from your IRA distribution expired at the end of 2012.
      Mary Ellen

      1. My tax advisor says the Qualified Charitable Deduction was extended through 2013. I made a contribution through my investment company and they know about it — I’m surprised you don’t know that. Please advise.

      2. Hi Shirley,
        Yes, the American Taxpayer Relief Act of 2012 extended the qualified charitable distribution provision through 2013 allowing you to still make a tax-free distribution directly from your IRA if you are 70-1/2 or older.
        For more information please see

        This tax provision will be included in TurboTax 2013. As with any tax law change, TurboTax is always up to date.

        Thank you,
        Lisa Greene-Lewis

    2. Hi Bob,
      The American Taxpayer Relief Act 2012 did extend the qualified charitable distribution deduction through 2013 as long as you were 70-1/2 and over and the distribution went directly from your IRA to the charity so I’m not sure why you had a problem, but I’m glad it was straightened out. As with any tax law changes TurboTax is always up to date and TurboTax 2013 will handle qualified charitable distributions.
      Thank you,
      Lisa Greene-Lewis

    1. Hi Kelly,
      If you are using TurboTax to prepare your tax return, you will find union dues under Deductions & Credits, Job related expenses.
      Answer no to Job related expenses, then yes to Other types of expenses.
      Mary Ellen

    1. Hi Lynne,
      If you sell property at a profit, the profit is taxable. This is true if it is real estate, business property, or personal property. The only exception is your principal residence. There is an exclusion of $250,000 in profit if you meet certain ownership and use conditions.
      Mary Ellen

  32. If I purchased a rainbow vaccum cleaner for the allergies and to help with smell of renal failure patient can I claim it in my taxes

    1. Hi Tina,
      If your doctor has prescribed the vaccuum cleaner, you can deduct it as a medical device. Without a prescription, it is not deductible.
      Mary Ellen

  33. Is Turbo Tax going to have a payment plan for states (Florida) that only file federal tax ?
    Every year I have to pay for state and federal tax usage even thought I do not use the state part?

  34. I had some property that was condemned for sale to the state. Is there a special way to treat condemned property other than listing it on Schedule D as a capital gain?

    1. Hi Ken,
      What you have is an involuntary conversion. If the amount you received was more than you paid for the property you have a taxable gain (unless the property was your principal residence).
      Gain from an involuntary conversion may be postponed to the extent that the taxpayer purchases replacement property that is similar to the old property or related in service or use (or like-kind in the case of condemned real estate). The replacement period is generally two years after gain is realized with certain exceptions, such as a principal residence in a federally-declared disaster area.
      Mary Ellen

  35. Being over 70, our retirement money is in a regular IRA with investment management expenses. May the IRA investment expenses be deducted versus money taken out?

    1. Hi Bill,
      The IRA management fees are a miscellaneous itemized deduction, reduced by 2% of your adjusted gross income.
      Mary Ellen

  36. We have Court ordered “Parental Responsibility” of our grandson and are allowed to take him as a dependent on our federal and state (Colorado) taxes. What type of forms do we need to show the taxing authorities that we have the authority for him.

    1. Hi Janet,
      In the event of an audit, or a conflict because your child filed a return claiming your grandchild, you will need a copy of the court-order, and well as proof that the child lives with you (school records should suffice).
      Mary Ellen

  37. Hi, I got tax credits last year for buying an energy efficient water heater for my house. I’d like to possibly upgrade another appliance to energy-efficient, will I still get credits for that this year?

    1. Hi,
      There are still credits for solar and wind energy improvements, but not for energy efficient appliances.
      Mary Ellen

  38. My family wants to help our Mother lower her estate value. What is the maximum amount a person can gift, to say there children, and not have the receiving end incur a tax burden? And, is there any limit on the amount of gifts a person can receive in one year?

    1. Hi Robert,
      Estate and gift taxes are intertwined. Your best source for that information is an estate attorney.

      In general, though, gifts are never taxable to the recipient. They are applied to the estate and gift tax exclusion amount of the giver. The lifetime estate an gift tax exclusion is currently $5,250,000. In addition, any one person can give $14,000 to any other person each year without using any of their lifetime exclusion.
      So if there are three children, each with a spouse and 2 grandchildren, there are 12 people who can receive $14,000 each year without any reduction in the lifetime exclusion.
      Mary Ellen

      1. If I am assisting my adult children by paying some of their monthly bills (phone, electricity, auto insurance, etc.), can I claim this on my taxes – as a gift or otherwise – without having to actually claim them as a dependent? They simply do not make enough money to pay all of their bills and rather than apply for government assistance, I help them. Thank you.

    1. Hi Mike,
      The amount you are paying through the garnishment for medical bills and for state income taxes (but not interest or penalties) is deductible.
      Mary Ellen

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