Showing posts with label Earned Income Tax Credit. Show all posts
Showing posts with label Earned Income Tax Credit. Show all posts

Thursday, September 19, 2013

Eight Financial Tips for Working Seniors

More and more people are continuing to work beyond retirement age. For some, it is a choice that keeps them active and involved. For others, it is a financial necessity. Whether work is a choice or a necessity, here are eight financial concerns that those who continue to work should keep in mind: 

1. You are entitled to begin receiving Social Security benefits at age 62. However, if you receive benefits before age of 66 and your earned income exceeds the set limit, your Social Security benefits will be reduced. At age 66, you will receive your full benefits regardless of earned income.

2. If, between the ages of 66 and 70, your earned income is sufficient that you don't need your Social Security benefits, defer them. For every year that you defer your benefits up to age 70, your benefit amount increases by 8% with an adjustment for inflation.

3. Consider the effect of employment on your income tax rate. Calculate your taxable retirement income from Social Security, pensions and retirement accounts and compare it to the current IRS tax brackets. If your earned income puts you into a higher tax bracket, put the amount of income that increases your tax rate into tax-deferred retirement accounts.

4. Take full advantage of tax-deferred retirement accounts. Older workers are allowed to save an extra $1,000 beyond the maximum annual contributions. Many of these accounts have having check writing privileges. You have the choice of standard checks or designer personal checks. This extra saving option adds money to your future retirement income and reduces your current taxable income.

5. Regardless of whether or not you are eligible for Medicare, take advantage of employer health insurance. Basic Medicare does not cover all expenses, and at best, pays only 80% of expenses that it does cover. Additionally, paycheck deductions for health insurance may be made pre-tax, which reduces your taxable income.

6. As investors approach retirement, investment strategies commonly switch from a growth-oriented portfolio to an income-producing one. Those who continue to work, however, are not relying investments for income. Moreover, earned income reduces the potential effects or a decline in the stock market. Those who feel comfortable with the risk could add to their future retirement income by continuing a growth-oriented investment strategy with some investments.

7. Keeping accurate records of living and employment-related expenses has two benefits. Accurately tracking living expenses enables you to make a more accurate estimate of your living expenses after retirement and assures that your combined Social Security benefits, pension, and investment provides a sufficient level of retirement income. Tracking employment-related expenses may lead to job-related tax deductions.

8. Studying your current cash flow and projecting it out for one year, three years, and five years for scenarios such as working full-time, working part-time, or retiring, enables you to analyze the benefits or necessity of working versus retiring. This study switches the emphasis from retiring on an arbitrary date to retiring as preparations become adequate to sustain the life you want to live. That is what retirement should be.

Author's Bio
Phillip Gruppelaar worked as a Sales Tax Inspector and Administration Manager before entering the finance industry in 1988. While working in motor vehicle finance he earned the “AIM Insurance, NSW Business Manager of Year 2000” award. He then moved to home loans and general asset finance including sourcing machinery finance. In 2007, he became General Manager of an online asset financing company, building it to be one of Australia’s largest and most successful. In December 2011, he returned to his own management consultant business and focused on improving client relationships and staff training for another of Australia’s large online finance brokerage firms.

Saturday, March 9, 2013

Start Filing Your Tax Return With These 6 Steps

IRS Form W-9
IRS Form W-9 (Photo credit: Wikipedia)
By Neda Jafarzadeh, a financial analyst with NerdWallet Investing. NerdWallet helps consumers make better financial decisions and compare total costs to find the best broker for their needs. 

If you haven’t already started preparing your 2012 tax returns, you will want to get started as the April 15th deadline is fast approaching. To get started, consider the following six tips: 

Tip 1: Know If You Need to File

If you aren’t sure whether you need to be filing a tax return for 2012, the IRS has a page that helps you decide whether or not you need to be filing. If you’ve decided that you do not need to file a tax return, keep in mind that you won’t be able to take advantage of the various credits that would otherwise be available to you. For example, if you made less than $50,270 in 2012, you may quality for the Earned Income Tax Credit (EITC), or if you were a college student in 2012 or your dependent was a student, you may be eligible to receive the American Opportunity Tax Credit. 

Tip 2: Taxable vs. Nontaxable Income

While most types of earned income is subject to taxation, other types such as child support payments, gifts, inheritances and welfare benefits, are not. In addition, keep in mind that if you received a refund, credit or offset from the state, you may be required to include that as income even if you did not receive a Form 1900-G. To learn more about what income is subject to taxation, check Publication 525 on the IRS page. 

Tip 3: Finding Forms and Publications

There are numerous ways you can get the forms you need to file your tax return. One way is it get the forms online or by phone if you call 1-800-TAX-FORM (800-829-3676) between 7:00 AM to 7:00 PM, Monday through Friday and request that they be mailed to you. You can even find the forms at your local post office or public library. 

Tip 4: Don’t Get Scammed

Tax scams are more common than you might think and the IRS has gone to great lengths to educate the public on recognizing and reporting these scams. If you aren’t sure whether you’ve fallen victim to a scam, the IRS has set up case scenarios to help you identify common scams, usually involving phone scams or identity theft. If you know you have fallen victim to a scam, you can use Form 3949-A to report it to the IRS. 

Tip 5: Get Help

If you are planning on using a DIY tax software, make sure you read customer reviews for the tool to see if your needs will be appropriately satisfied. NerdWallet also ran a comparison of the top two softwares available H&R Block and TurboTax, so feel free to reference that resource as well. If you plan to hire a professional tax preparer, do check his qualifications by asking for his Preparer Tax Identification Numbers (PTIN). 

Tip #6: Use Tax Credits Available to Parents

If you are a parent, be sure to look into the tax credits that are available to you like the Child and Dependent Tax Credit. You should be eligible to receive this credit if you have a child under the age of 13 and had to pay for a caretaker while you went to work or while you looked for work.

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