Mid-year Tax Check up – A few things to consider

Posted by Denise Kovach, CFP®, AIF®, NSSA®

Things happen throughout the year that could have a big impact on your taxes, such as changing jobs, getting married, or retiring. Now is the time to ask yourself some questions in order to maximize any potential tax benefit and reduce any additional tax liability.

Did you change jobs?

If so and you plan to rollover your 401k into an IRA or similar plan, be careful! If the money is paid directly to you, 20% will be withheld for taxes and if you do not deposit the money in the new plan (including the 20% that was withheld) within 60 days, you may owe tax on the withdrawal, plus an additional 10% if you are not yet age 59-1/2.

Did you get a raise?

You may need to adjust the amount of tax withheld from your check because the raise may send you into a higher tax bracket. Use the IRS withholding calculator and work with your HR person to adjust your W-4. You may also want to consider using some or all of your raise to increase the amount of your pretax contribution to your 401k. By doing so, you will reduce the amount of taxable income and increase your savings – a win, win.

Are you retiring?

You may very well begin taking distributions from your retirement accounts to supplement your income. The amount you withdraw can have a huge impact on your taxes as well as how long your savings will last. The same goes for those of you turning age 70-1/2 because you will be subject to your mandatory distributions.

If you are getting married, evaluate filing jointly as you may be able to save on taxes. If you are getting divorced, then going to a single status will probably increase your taxes.

These are just some of the things to consider before the year ends.

Click here for more information on Denise. To set up a free consultation with Denise, either call 407-869-9800 or complete this form.


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