Financial planning is a huge part of what we do here at Creekmur Wealth Advisors, so it's no surprise that tax planning is one area we spend a lot of time working in. When I talk about tax planning I am not talking about filling out and submitting your tax return every April 15th. Filing your taxes is necessary, but it's reactive or backward-looking. Tax planning, on the other hand, is a forward-looking, comprehensive approach to reducing lifetime taxes and increasing overall after-tax wealth.
Ready or not - here it comes! Tax filing can be confusing and stressful. Here's a few things you can do to make this process a little smoother.
As tax time rolls around each year we all start getting the necessary documents for proper filing of our taxes. You're not alone if you find all of these important forms a little confusing! Besides the W-2 which is used to report wages, form 1099 is widely used for a variety of purposes. Here are the basics you need to know about this multi-functional form.
What you need to know.
When you reach age 70½, the Internal Revenue Service instructs you to start making withdrawals from your traditional IRA(s).These withdrawals are also called Required Minimum Distributions (RMDs). You will make them, annually, from now on.1
If you fail to take your annual RMD or take out less than the required amount, the I.R.S. will notice. You will not only owe income taxes on the amount not withdrawn, you will owe 50% more. (The 50% penalty can be waived if you can show the I.R.S. that the shortfall resulted from a “reasonable error” instead of negligence.)1
Many IRA owners have questions about the rules related to their initial RMDs, so let’s answer a few.
Are you aware of them?
The federal government offers some major tax breaks for older Americans. Some of these perks deserve more publicity than they receive.