Showing posts with label Income tax. Show all posts
Showing posts with label Income tax. Show all posts

Thursday, July 18, 2024

What Are the Pros and Cons of Working With a Tax Preparer?

As the year moves forward, many people wonder whether they should handle their taxes on their own or hire a professional come next tax season. Understanding the pros and cons of working with a tax preparer can help you make an informed decision. 

This knowledge is especially important for individuals over 50 who might have more complex financial situations.

Expert Knowledge and Experience

One of the primary benefits of hiring a tax preparer is gaining access to the expertise they bring to the table. Tax professionals have extensive knowledge of tax laws, regulations, and potential deductions. This expertise can result in significant savings and ensure that your tax return is accurate.

Professionals stay up-to-date on tax code changes, making it easier for you to comply with new rules. For those with investments, retirement accounts, or multiple income streams, a tax preparer’s experience and know-how can be invaluable.

Time and Stress Savings

Filing taxes can be time-consuming and stressful, especially if you’re not familiar with the process. A tax preparer can take this burden off your shoulders, allowing you to spend your time on more enjoyable activities. 

They handle all the paperwork, calculations, and submissions, completing everything properly and on time. This peace of mind is particularly beneficial for those in their golden years who would prefer to avoid the hassle of tax season.

Cost Considerations

While hiring a tax preparer can save you time and potentially money through deductions, it does come at a cost. Tax preparers charge fees for their services, which can vary based on the complexity of your tax return and the preparer’s experience. 

For some, this cost might outweigh the benefits, especially if their tax situation is relatively straightforward. It’s essential to weigh the potential tax savings against the preparer’s fees to determine if their services are worth the investment.

Privacy and Security Concerns

When you work with a tax preparer, you’re sharing sensitive financial information. There are many ways for tax preparers to protect client information, such as using secure portals and encryption. 

However, it’s crucial to choose a reputable professional to ensure your data remains confidential. Verify their credentials and read reviews to make sure they follow best practices for data security. Trust is fundamental in this relationship, so take the time to find someone reliable.

Final Thoughts

In conclusion, understanding the pros and cons of working with a tax preparer can help you decide what’s best for your individual situation. 

The expert knowledge and stress relief they offer can be particularly beneficial for those over 50. However, you must consider the cost and ensure you select a trustworthy professional to protect your information.

By weighing these factors, you can make an informed decision that aligns with your needs and preferences.


Friday, March 8, 2024

5 Home Repairs to Use Your Tax Return On

Tax season is here, and for many homeowners, this means receiving a refund check from the government. While it can be tempting to splurge on a vacation or new electronics, consider investing in your home instead.

Your tax return can help you tackle those long-overdue home repairs that have been on your to-do list.

This blog post will discuss five crucial home repairs that you can use your tax return on.

Roof Replacement

Your roof is one of the most important components of your home, protecting you and your family from the elements. If your roof is showing signs of wear and tear, such as missing shingles or leaks, it's time to consider a roof replacement

Using your tax return towards a new roof can not only enhance the curb appeal of your home but also increase its overall value.

HVAC System Upgrade

Another essential home repair that you can use your tax return on is upgrading your HVAC system. A new heating and cooling system can improve energy efficiency, lower utility bills, and provide a more comfortable indoor environment for you and your family. 

By investing in a new HVAC system, you can enjoy long-term savings on energy costs and increase the resale value of your home.

Window Replacement

Old, drafty windows can lead to energy loss and higher utility bills. Use your tax return to replace outdated windows with energy-efficient models. 

Not only will this improve the insulation and energy efficiency of your home, but it can also enhance the aesthetics and curb appeal of your property. With a wide range of styles and materials to choose from, you can find windows that suit your budget and design preferences.

Kitchen Remodel

If your kitchen is in need of a makeover, consider using your tax return towards a remodel. Updating your kitchen can increase the functionality and value of your home while creating a more pleasant and inviting space for cooking and entertaining. 

Whether you choose to upgrade appliances, install new countertops, or refinish cabinets, a kitchen remodel can breathe new life into your home.

Bathroom Renovation

Another home repair project that you can tackle with your tax return is a bathroom renovation. Upgrading your bathroom with new fixtures, tiles, and lighting can enhance the comfort and functionality of the space while adding value to your home. 

From a simple refresh to a full-scale renovation, investing in your bathroom can improve the overall appeal and livability of your home.

Final Thoughts

As you consider how to allocate your tax return this year, think about investing in your home with these five crucial repairs. From roof replacement to kitchen remodels, there are numerous ways to enhance the comfort, energy efficiency, and value of your property. 

By using your tax return wisely, you can make long-lasting improvements that will benefit you and your family for years to come. So, before you splurge on discretionary expenses, consider prioritizing these essential home repairs with your tax return.

Monday, November 6, 2023

What You Can Do Now to Prepare for Tax Season

Tax season is around the corner, and it’s time to start preparing for it. Tax season can be stressful, and you don't want to get caught playing catch up when April rolls around. 

From gathering documents to tracking expenses and donations, there’s much to keep track of. But don't worry – this guide will cover everything you need to do now to have a smooth and stress-free tax season.

Gather Your Documents

Start by gathering all your important financial documents, such as W2 forms, 1099 forms, and any receipts you may have made throughout the year. 

This is the perfect time to check your mailbox for tax-related documents that may have been mailed to you. When you receive your documents, store them safely and keep them organized.

Register for Tax Software

You don’t have to wait until tax season to do your taxes. Many reputable websites offer tax preparation software that you can use year-round. 

By registering early on, you'll have time to familiarize yourself with the software and get a head start on completing your taxes.

Organize Your Expenses

If you plan on deducting expenses on your tax return, it’s essential to make sure all your receipts and records are in order. Take the time now to organize them, making sure that each receipt is labeled with the correct expenditure category. 

This will help you avoid the hassle of putting together scraps of paper at the last minute, which can lead to errors and missed deductions.

Update Your Profile

It's also a good time to verify that all your personal and financial information is up-to-date in your tax software or with your accountant. 

Confirm your address, social security number, bank account information, and any other relevant details. This will ensure that your tax return is accurate and filed smoothly, avoiding any delays or potential red flags.

Review Your Investments

Finally, take the time to review your investments for the year. If you have any capital gains or losses, there may be some tax implications. Consult with your tax planning advisor or software to find the best strategy for minimizing taxes while also diversifying your portfolio.

Final Thoughts

Getting ready for tax season may seem like a daunting task, but by following these simple steps it can be a relatively easy and stress-free endeavor. 

Make sure you gather all your documents, organize your expenses, update your personal and financial information, and review your investments before waiting until the last minute to start. 

With these tasks crossed off your list, you’ll be better equipped to handle any surprises and feel more confident and in control of your financial future.

Monday, January 9, 2023

Tax Planning: The Basics and How to Utilize These Tools

Tax planning is an essential part of budgeting and managing your finances. It’s the process of utilizing tax laws, deductions, credits, and other financial tools to reduce your overall tax burden. 

Tax planning is a smart way to maximize your resources and save money in the long run. So let's dive into the basics of tax planning and how you can use these tools.

What is Tax Planning?

Tax planning involves researching applicable taxes to determine how to legally minimize them. This includes researching deductions, credits, exemptions, and other provisions that may be available to you as a taxpayer. It also includes exploring investment options such as IRAs or 401(k)s that can provide additional tax benefits.

It’s important to note that there are different types of taxes depending on where you live; state taxes are separate from federal taxes, and some locations have local income or sales taxes. 

Understanding the type of taxes you’re dealing with is essential for successful tax planning. Finding a qualified tax planner, such as Golden Tax Relief, is the best way to ensure you get everything done properly.

How Does it Work?

Tax planning reduces your taxable income through various means, such as deductions or credits for certain expenses like charitable donations or health care costs. 

Additionally, investments in retirement accounts are often a great way to reduce taxable income while also building wealth over time. 

If done correctly, tax planning can lower your overall tax liability and maximize available funds for other purposes such as investing or saving for retirement or college tuition.

Why Should I Do It?

Tax planning isn’t just about saving money; it’s about taking control of your financial future by making informed decisions about how much you owe in taxes each year. 

You can reduce your taxable income by taking advantage of all available deductions, credits, and other financial tools. 

Then you can potentially end up with more money at the end of the year than if you had simply paid full price on all applicable taxes without researching potential savings options first!

Tax planning is an important tool for managing finances efficiently and effectively. By understanding applicable taxes and researching available deductions, credits, exemptions, and other financial tools available to taxpayers, you can make more informed decisions when it comes to minimizing your overall tax liability while maximizing resources for other purposes like retirement savings or investments. 

Taking advantage of these opportunities will not only save money but also give you peace of mind when it comes to budgeting for future years!

Tuesday, June 29, 2021

How to Prepare for Your Next Tax Return

Statistics indicate that over 80 million Americans use a professional on a yearly basis to assist them with their tax returns. If you fall under this category, you've come to the right place. 

As the old saying goes 'Proper Preparation Prevents Poor Performance'. As such, the IRS recommends that you prepare for the next tax season as soon as possible.

Prepare Important Documents, Bank Statements, and Tax Forms

The idea of gathering your documents early, for the next tax season may seem minor, but gathering all the documents you need and placing them in a convenient location can help to ensure that you don't forget anything once the season actually approaches. 

Experts suggest that you should create a folder in which you place every document that you'll need for the upcoming tax season.

Make A Charitable Donation

Spring and summer are perfect for doing some thorough cleaning around the house. In the midst of doing this, you'll undeniably find clothing and other items that you no longer use. 

Therefore consider donating some items, because you can deduct them on your upcoming tax return.

Tax Attorneys

Depending on your particular circumstance, you may owe taxes for the upcoming season. For instance, as a private contractor, you have to set aside a portion of your income to pay in taxes at the end of the year. 

If you fall under this category or if you want to ensure that the process remains error-free, consider the possibility of hiring a tax attorney. Tax attorneys can help you to:

  • Reduce your tax burden
  • Establish a savings account for the sole purpose of accumulating money you think you may have to pay.
  • Estimate how much you may owe and develop a budget that enables you to set aside a portion of your income to take care of said obligation.
  • Maximize itemized tax reductions.

Lifetime Learning Credit

If you're in college, there's no reason why you shouldn't take advantage of the Lifetime Learning Credit (LLC). If you're currently in school and claim the Lifetime Learning Credit, you can get a tax return of up to $2000.


If you recently became a parent, you need to gather information on your dependents so that you can include them on your tax return. In order for you to claim a dependent, you need the social security number and name of said person.

Every year, millions of taxpayers wait until the very last minute to file their taxes simply because they failed to organize the necessary paperwork beforehand. 

But, by preparing for the upcoming tax season way in advance you can submit your return as soon as possible which provides you with several benefits such as getting your refund faster as well as extra time to pay taxes in the event that you owe.

Saturday, January 16, 2021

6 Ways to Make This Year's Tax Season Easier

The new tax season is upon us. For 2019, almost 31 million Canadians filed their taxes by mail or electronically. This was despite a global pandemic that virtually stopped citizens from doing anything. 

The upheaval of the previous year could result in an abnormal tax filing season. There are ways to make it easier so nothing is left out. Here are six tips to consider.

1. Get Organized

The organization is a top priority to receive the maximum refunds and avoid potential audits. All of your paperwork must be ready so you can efficiently file your taxes. If you didn't have your work organized already, then you must take time to do so now.

Ensure receipt of your T4 slips before the due date when it's supposed to be delivered. Pull out all receipts and invoices related to business expenses. Locate bills for university tuition or student loans. Finally, organize the paperwork related to tax-deductible donations.

Once the information is gathered you want to separate it per its section on the tax form. Thus, income, interest, and dividends are first. Deductions and credits are underneath that information. If anything is missing, then see if it can be retrieved online.

2. File As Early As Possible

You don't have to wait for your T4 slip to arrive before you file your taxes. You can start as early as 12:01 a.m. on January 1. As long as the government offers updated tax forms, you can start adding information when it comes to deductions and tax credits. 

You actually don't have to wait for your T4 or T4A to include income information. You'll be able to pull the data from your last pay stub or year-end investment statement. The one thing you'll need to close things out is the employer's or investment firm's government ID.

3. Have Funds Available For Payments

Unfortunately, there are times where you'll owe taxes. This is something you might be aware of before the new tax season. Especially if you collected non-taxed unemployment or ran your own business. 

For these situations, you want to have the necessary funds to pay taxes due at the time of filing. If you don't have them available when you complete the forms, then work to get the funds so they're available when the official filing date comes around.

4. Invest Maximums Into Retirement Funds

One way to reduce your tax values is to maximize your retirement investments. This should be done at the end of the previous year for some. Other types, like a tax-free savings account (TFSA), might allow you to make contributions at the time of filing. Take advantage of this to minimize tax liabilities.

5. File Online

There are plusses to file taxes online Canada style. First, your fear of on-time delivery by mail is minimized. Online filing through companies like Cloudtax sends your information directly to Ottowa and the provincial governments. 

Second, you receive your refund much faster. If you decide to file online then watch out for underlying fees. There shouldn't be any if you file a standard T4. However, companies might charge extra if you need to file line-item taxes for your business.

6. Let Someone Else Do It

Having a professional handle your taxes takes a huge burden off of your shoulders. They not only put together the documents but they also review information to see if any further reductions can be made on your taxes. 

In the end, they can help increase the refund you thought you'd receive. Yet, this doesn't happen without following step one in this process. 

You still need to organize all of the required paperwork. The tax professional can't produce the best outcome for you without the necessary T4 & T4A slips or the required invoices and receipts.

The above steps might seem daunting at first. However, you don't have to implement them all at once. Regardless if you file on your own or through a tax service, preparation is at the heart of everything. 

When you have all of the required documents, filing your taxes is much easier. On top of that, it results in a maximum refund that can help support your family in the new year.

Tuesday, January 8, 2019

Checklist For Tax Preparation

Ready or not, it’s time to start thinking about your taxes. Gathering the appropriate documents in advance can speed up the preparation process and help you take advantage of money-saving tax breaks. Here’s a list of items most taxpayers need to file their tax return.

Personal information

  • Social security numbers and birth dates for you, your spouse and your dependents
  • A copy of your prior year tax return
  • Routing number and account number to receive your refund via direct deposit


  • W-2 forms for you and your spouse
  • 1099-C forms for cancellation of debt
  • 1099-G forms for unemployment income, or state or local tax refunds
  • 1099-INT, 1099-DIV, 1099-B forms for investment or interest income
  • 1099-MISC forms for independent contractor income
  • 1099-R forms for distributions from IRAs or retirement plans
  • 1099-S forms for sale of property income
  • SSA-1099 for Social Security income
  • Alimony received, paid
  • Income and expense from a business
  • Income and expense from rental property
  • Miscellaneous income: jury duty, gambling/lottery winnings, scholarships, Medical Savings Account (MSA), unreported tip income, prizes and awards


  • Forms 1098 for mortgage interest, points and private mortgage insurance
  • Form 1098-E for student loan interest
  • Form 1098-T for tuition paid
  • Federal and State estimated tax payments
  • Medical and dental expenses (including medical mileage, long term care health insurance)
  • Real estate and personal property taxes
  • State and local taxes
  • CASH and NON-CASH charitable donations (including mileage driven)
  • Casualty and theft loss (only for federally declared disasters)
  • Gambling losses to the extent of winnings
  • Child care costs including care provider identification
  • IRA contributions
  • Qualifying energy expense for home improvements
  • Receipts for classroom supplies (educators in grades K-12 only)
  • Receipts for moving expenses (members of the military only)


  • Form 1095-A, Health Insurance Marketplace Statement
  • 1095-B, 1095-C Health Insurance Verification Form is the fastest and easiest way to do your taxes and get the biggest possible refund, guaranteed.

Monday, October 13, 2014

Save Savvy: Tips for Calculating the Cost of your Retirement

When it comes to planning for the future, one of the main concerns for most people is saving enough money for retirement. With social security, inflation, and the rising cost of health insurance, there are many factors that determine the amount that is needed once entering the golden years. To determine the amount you'll require for retirement with accuracy, there are a few tips to follow to ensure that you can live comfortably.

Look at the Tax Rate

When calculating your retirement, it's important to consider how your money will be taxed. It may be easy to look at a marginal tax bracket, but your income will likely be taxed less and in the 25 percent tax bracket. Use an effective tax bracket rate online rather than depending on a marginal tax bracket to ensure that your numbers are accurate.

Consider Inflation

The cost of inflation will affect how much you'll need to live off of during retirement and should be accounted for to ensure that you can keep up with the rising cost of living. According to, the cost of living in your first year of retirement will likely increase by the fifth year of your retirement. Use an inflation rate of three percent and multiply your income from the prior year by 1.03.

Factor in Assisted Living

Although you may currently be healthy, it can be difficult to expect what age will bring once entering retirement. When calculating how much money you'll need in the later years of life, factor in the cost of assisted living or a live-in nurse to ensure that you receive the assistance needed if your physical or mental health declines according to Sunshine Retirement community.

Determine the Rate of Return

Most people use five to 12 percent of average annual returns after investing during their life, but there are a few factors needed to determine an accurate rate of return and how it will impact what you'll have in retirement. Consider the investment time period and if the rate of return takes inflation into account.

When it comes to calculating the cost of retirement, there are a few factors that will determine how accurate you come to finding the cost of leaving the workforce. Although it's easy to consider the cost of housing, utilities, and general expenses, there are a number of other influences that determine how much you'll need to live comfortably and enjoy the fruits of your labor. Look over here to find out more information about how much living in a retirement community costs.

Wednesday, January 29, 2014

What To Watch For This Tax Season

The tax season is the time of year when many families and individuals have to figure out what they owe in taxes or imagine what they are going to get back in a refund. However, there are some items that families and individuals have to look at to make sure that all of the bases are covered before a tax return is filed.

Each of these items are things for people over 50 to look out for when they are preparing their tax returns. There are considerations for people over 50 that are unique to them as parents and people with greater earning potential.

The House

Many people over 50 own their home and have for many years. However, house payments usually contain interest payments that can be used as deductions on a tax return. If the individual is going to make their payments faithfully, they should also use their interest payments to get a write-off on their return.


Many parents over 50 are paying for their children to go to college. These loans also have interest payments that can be written off just as they are with a home loan. However, the stressed parent of a college student may forget to deduct the interest payments that they have made while their child is still in college.


Parents over 50 may also have dependents that they can name on their income tax return. Having dependent children who live at home at least for part of the year can help to reduce an older parent's tax liability simply because the dependent helps to reduce the tax bracket that the individual falls under. Even if the child is an adult, they may be considered a dependent child who can be claimed on an income tax return.

Capital Gains

Many people who have been earning money for quite a long time may also have a long list of investments that they are juggling to produce income or as part of the retirement planning process. However, every dollar that is earned from the dividends on these holdings or from the sale of these holdings must be reported. Many people may forget these things and fail to report them on their income tax return. Failing to report these items on a tax return could cause the individual to be audited now or in the future.

Side Businesses

Many people who work for a living also have side businesses where they own properties and rent to tenants or do work on the side to earn extra cash. These side businesses all produce income meant to finance the family, but this money has to be reported on income tax returns to avoid the ire of the government.

Every person who does a little bit of work on the side must be certain that they are not only calculating how much money they are making but also notating the deductions they can take for that business.

Mileage reports, business expenses from internet connections to office supplies and even electronic equipment can be used as deductions for these side businesses. The only way the side business will be worth it at the end of the year is if the individual deducts all of the items they use for the business.

When looking at home to finance the family activities for the year as well as preparing for tax returns at the end of the year, the family can put together a tax return that accounts for interest payments, dependent children, side businesses and investment income. Wit all of these factors in play, any family can feel safe during the tax season.

Author Bio
Joshua Turner is a writer who creates informative articles in relation to business. In this article, he offers tax tips to individuals and aims to encourage further study with a masters degree in accounting.

Monday, November 25, 2013

5 Reasons Why International Tax Planning is Crucial for Offshore Company Formation?

clip_image002The ultimate goal of an international tax planning is naturally a significant reduction in tax liability. Legal elimination of your taxes may not be possible, and rightfully so, but you can certainly cut down the taxes to such an extent that you won’t feel you are paying any taxes. This is obviously your ultimate aim when you go for international company formation with registered office and to help you with this you need a competent law firm or an accounting company on your side. Let us take a look at 5 reasons why it is important for you to plan your international taxes when it comes to offshore company formation.

1. Offshore Banking Accounts: For registering and establishing an offshore firm, one of the important criterions is to have a company’s offshore bank account. Tax haven nations are loved by such firms as it easily allows them holding funds with guarantee that the owner’s profile won’t get divulged to the government or to the public through the strictest secrecy laws of the banks. If this is the most important aspect for the company owner, then it becomes important to consider all different countries that suit such requirements.

2. Capitalization Rules: One of the other advantages that company looks for in tax haven nations is their capitalization rules. These nations normally offer very thin capitalization. Due to this there is very restricted scope of debt finance. In one way, such rules of capitalization help international tax planning as they become more appealing to multinational firms that are largely dependent on the capital funds raised by their shareholders. This way they feel more protected against any type of possible debts.

3. Choosing the Right Tax Haven Nation: This is one of the most important considerations that you should make. Some of the most popular choices are Bahamas, Monaco, Malta, Isle of Man, Cyprus, Switzerland, Gibraltar and Andorra. All these nations offer various favorable conditions for the offshore formation of your company. That being said, it is important that all the advantages are carefully compared before choosing one of these nations. You should take a close look at the financial, telecommunication and banking industries in these nations before you make a move.

4. Preparing Income Tax Returns: Business people don’t want to worry about preparing for tax returns. International firms find it very cumbersome to prepare their tax reports, which is necessary to be filed to the government. If these reports are not submitted on time, the companies could run into a lot of trouble. This is why it is important to hire a reliable agent who can take care of such works with precision and more importantly without any delay.

5. Double Tax Treaties: These are very advantageous to companies as these treaties are entered into by the government with other nations and give the companies ore opportunities for saving on foreign taxes and trading expenses. This happens due to an international tax legislation that the two countries agree upon. The efficient cross border taxes help these firms save on personal income taxes, corporate income taxes etc.
You can visit the link to get more ideas regarding company formation with registered office here-

Author Bio
Terry Novik is a tax planning professional with over 10 years of experience, who helps businesses, companies and individuals with their tax filing.

Tuesday, October 22, 2013

Planning the Best Strategy for your Tax Affairs

There are so many aspects to taxation that it is impossible for a layman to understand everything. You certainly do not want to be paying tax when you need not, and if there are allowances that you can offset against tax, you want to know all about them. A specialist in tax is the answer for you, especially if your finances are particularly complex.


Even within the UK tax structure there are specialists working in small sections of legislation and for some people there may be the need for more than a single expert. If you feel you want advice, you need to find an expert with which you can discuss your personal scenario and take it from there.

You may need help on personal affairs or on those of your business. The process will be the same but you are likely to be guided to a different specialist after the initial assessment has been completed. If you are looking for help on a business level you may also need personal help on the assumption you may have large assets. There is always inheritance tax to take into consideration as well as your investments and pension provision.

Start the process

If you find the right company, it is likely that you can begin with a telephone call with no obligation at that stage. That call should identify your general needs. If you then want to proceed further, a meeting can be arranged where you are welcome to bring along your accountant or financial adviser to take things a step further. You are certain to be able to understand the fees involved and what you will get for your money before beginning.

Various areas

Corporate and personal taxation are just two of the areas that may be examined. There are strategies that can relieve you of stamp duty and pension products that maximise tax efficiency. Allowances against tax are widespread and 100% legal. You should be thinking about your taxable income each year and find out what can be done to reduce it. Protecting your assets where legal and possible makes absolute sense.

Inheritance tax is a common area where those with considerable assets need help. It is certain that you can find ways to reduce your liability if you make that call. Capital Gains Tax is another popular area that you can receive advice on and implement measures to handle it in the most efficient way.

Your money is hard earned and building up your assets will have taken hard work, and possibly very long hours. You want to protect them whilst obviously paying the tax that is due. That does not mean you should want to pay tax when it is not necessary to do so.

Tax planning can be fairly complex because it involves so many things. Budgets regularly propose and ultimately pass new legislation throughout the tax regime. If you want to keep abreast of things and know your affairs are being handled in the most tax efficient way, you need an expert.

Tuesday, October 8, 2013

Unexpected Costs: Five Things That Could Surprise You After Retirement

For well over 30 years analysts and demographers have spoke of the years when the Baby Boomer generation would hit retirement age. That has now come to pass, with more than 5,500 individuals in the United States hitting 65 every day. Those seeking senior living Mesa AZ, offers are arriving in that city by the thousands each year. For those who have planned well, the golden years lay before them. For over half of those new seniors, however, they are financially unprepared for the prospects of retirement. 

In addition, even those who tried to plan financially are finding that there are a number of potential surprises in retirement that upset those plans. Their experiences serve as a cautionary tale of financial issues that can disrupt your retirement plans. Below are five of those potential additional costs of which you should be aware. 

Unanticipated health care costs.

Many retirees have not borne the brunt of their personal health care expenses until they are on their own. Additionally, people that have been healthy all their lives are surprised by sudden diseases and ailments that come with the aging process. With the new Affordable Care Act, there is a great deal of uncertainty and confusion about how best to manage medical costs. One unpleasant irony for many is the more they have prepared and have adequate financial resources, the more they are often charged for their care. This includes surcharges for Medicare patients with higher incomes (currently $85,000 single and $170,000) filing jointly.

Taxes on income.

The fact that social security benefits are subject to taxes above a certain income threshold both surprise and aggravate many. Instead of being seen as the fruit of after-tax dollars, the government stands ready to again rake another share of the income you receive. 

Loss of income

Couples who plan to retire together make plans that deal with average life expectancies. When one spouse passes earlier than planned, the survival benefits lost can upset those budgets. Experiencing injury within the workplace could also effect this loss of income and could create a decrease in investments funds. 

Taxes on withdrawals.

There are very explicit rules concerning the taxation of withdrawals from different retirement savings plans. Aside from the risk of extra taxes and penalties, many find the taxes to be a larger burden than built into their budget. Creating alternative sources of funds will be able to maintain the investment path while decreasing the taxation seen on the withdrawals. 

Greater than anticipated spending.

Financial planners work with individuals to set up spending for 20 to 30 years in the future. Even with allowances for inflation, many retirees find that it simply costs more to live and enjoy their freedom than they ever anticipated. Rather than living a sedentary lifestyle sitting at home, individuals find they enjoy traveling and visiting with grandchildren. Everything from dinner out to giving more gifts than planned can cause shortfalls in the budgets that were established when much younger.

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.

Wednesday, July 3, 2013

So…Where Does All of Your Tax Money Go To?

Filing your tax returns is never fun business, especially when you don’t really understand where your money goes. For the most part, Americans know that their tax dollars help the government pay for infrastructure such as roads and defense for the country. But exactly how much of their money goes towards these purchases? Nowadays, the answer can be found with the click of a button. As promised in the State of the Union, you can now visit the White House website and input your income tax details to see how the Federal government is spending your money.

So exactly how does the government spend the income tax of an average American family which makes $50,000 per year and consists of two parents and a child? Here is a listing of the departments that the government pays for with income tax payments:

National Defense - 24.64%

The primary job of a government is to protect its citizens, so it is not surprising that defense swallows nearly a quarter of the average family’s income tax. This includes the massive 10.26% that is currently being spent on ongoing operations in places like Afghanistan. While many see defense as a necessary big-budget item, others complain that America overspends: the US spends more on defense than the next 19 countries combined!

National budget estimates for 2013:

Health Care - 22.45%

Medicaid and Medicare make up most of the healthcare category which provides cheap health insurance for the elderly, the disabled and those receiving a low income. A small fraction of the health care budget is also spent on health research and disease control which helps to maintain a good quality of public health for all those in the United States.

More info about healthcare spending in the US:

Job and Family Security - 17.26%

The Job and Family Security section of your federal income tax receipt makes up most of the welfare which covers a wide array of safety-net programs. The largest item within this bracket however is actually retirement and disability benefits for federal military and civilian employees. These benefits ensure that everybody from soldiers to teachers has enough money to retire and live contently. This is followed by food and nutrition assistance (including SNAP, formerly known as food stamps) at 3.89% and unemployment insurance at 0.99%.

Breakdown of Job and Family Security section and other sections:

Net Interest - 8.01%

The government currently spends more on running the country than it receives back in taxes, meaning that the federal government currently runs a deficit in the borrowed. As you are probably aware from credit card bills or your mortgage, interest can be killer and there is no exception when it comes to sovereign debt. In the case of the US, 8.02% of the average family’s tax money is spent just on servicing the interest on loans the US government has taken out. 

More info about the Net Interest paid by the government:

Education and Job Training - 3.30%

Considering that education is supposed to be the silver bullet, a surprisingly small amount of tax money is spent on maintaining K-12 education, college financial aid and job training from federal income tax. This department also provides training and positions for those who have disabilities. This number can be seen as misrepresentation however, as some state taxes also go towards funding education.

Breakdown of Education and Job Training section and other sections:

Veterans Benefits - 4.53%

Veterans benefits is probably the one section of government spending that requires no squabbling, as looking after those who have served their country is seen by many as a duty and not as an option. In fact, many are arguing for spending on veterans benefits to be slightly included so as to quicken the process of veterans receiving their benefits, as currently the Department of Veterans Affairs does not use a computer filing system and therefore many needy veterans must wait months (if not years) to receive their due.

More information and detailed breakdown on Veteran Benefits:

Natural Resources, Energy and Environment - 2.05%

Most of the energy and environment budget is spent on energy and environment concerns that most of us take for granted: reducing pollution, managing the nation’s water and undertaking conservation of our nation’s forests and protected areas. This section does contain some items that can be controversial: from the funding of renewable energy projects at one end and to the funding of oil pipelines at the other.

Breakdown of Natural Resources, Energy and Environment section and other sections:

International Affairs - 1.72%

Most Americans think a much greater proportion of the federal budget is spent on international affairs than actual is with a tiny 0.8% of tax payers’ money being spent on development and humanitarian assistance. The figure for international affairs also includes the 0.5% that is spent on the essential components of foreign affairs like funding embassies and America’s participation in international organizations.

Detailed breakdown of the spending:

Science, Space and Technology Programs - 1.06%

Just over 1% of your tax bill is spent supporting scientific research, with that money roughly being split evenly between NASA and the National Science Foundation. As well as funding big ticket items like shuttle missions and probes, money invested in science in the US pays back dividends in all kinds of unusual ways. For example, the Internet was pioneered by NSF back in the late seventies.
Detailed breakdown of this sector and other sectors as well:

Additional Programs - 14.99%

The remaining items on the itemized federal tax receipt are small-ticket items that nevertheless are essential to the running of the USA, including the cost of law enforcement, response to natural disasters, and Additional Government Programs which includes the cost of running federal government and paying congressmen, senators and the President.

Author bio: This article was written by Simon a blogger, content manager, financial expert. He is a financially conscious guy with a Msc. in International Economics. He is a longtime contributor to various financial, accounting, taxation blogs among others the authoritative taxation and accounting blog of the Wallace&Associates APC Los Angeles a tax consulting services company.

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