Many Americans expect to continue working past traditional retirement age.
Many people would consider Margaret Haapoja's post-retirement career ideal. At 71, she has continued her longtime career of writing gardening articles published in newspapers and magazines. What's not to love about getting paid for a hobby you enjoy, covering a topic on which you are an expert?
The weed of tax complications, for one. Haapoja built her retirement savings on her writing income, and now her writing income is a factor that she and her husband must take into consideration as they calculate how much they can withdraw from her individual retirement account. They also have to look at how her income affects their net take from Social Security. "It doesn't discourage me from taking work," Haapoja says, but the situation is more complicated than she had anticipated.
More Americans than ever expect to continue working past the traditional retirement age. The 2013 Wells Fargo Middle Class Retirement study, which surveyed 1,000 middle-class Americans, found that 34 percent of this group thinks they will have to work until age 80.
But when Social Security benefits are added to your income stream, you need to factor in a fresh set of tax considerations, as Haapoja has learned. After a certain point, new earnings can push you into a tax bracket that effectively erodes some of your Social Security income, which means you might not capture the net gain from working that you had hoped. If you're close to retirement, you need to bear this in mind as you tee up an encore career.
Making some early preparations can reduce stress and save you money at tax time.
Beware the ides of April.
That's when many of us procrastinators find ourselves in a frenzy, trying to cram a year's worth of tax planning into the span of a few days. But the act of paying Uncle Sam shouldn't be treated like finals. After all, it's not just a letter grade that's at stake anymore -- it's your time, your peace of mind and, most important, your money.
To clue you in on the tax moves that could lower your overall bill for the year -- and help you avoid an all-nighter come April 14 -- we've put together some of the most important questions you should ask yourself now. It may seem like a pain to gather the records and receipts that you'll need to answer some of them, but you'll thank yourself later.
No. 1: Do I need an accountant?
Before you do anything, you should decide whether you need the help of a professional. This is especially important to consider if your financial situation became more complicated this year. If you went through a big life change -- like getting married, having a baby, buying a home or starting your own business -- or if you exercised stock options, you should probably hire an accountant.
Donations can help lower your tax bill if you know and follow the IRS rules.
Each year as Dec. 31 draws near, Americans are bombarded by requests for donations. Many answer those solicitations, happily giving to their favorite charities.
This year-end generosity also might pay off at tax time, as long as you know and follow the Internal Revenue Service's rules on tax deductions for donations.
With more than $300 billion donated every year, America is No. 1 for generosity. Of course, all that giving has benefits when tax time rolls around.
Say what you want about Americans, there's no denying the USA is the most generous country on Earth.
According to Philanthropy magazine, America gives $300 billion annually to charity, with 79 percent coming directly from individuals and the rest from foundations (15 percent) and corporations (6 percent). It's light years ahead of the competition, Philanthropy says:
You still have time to make some money-saving moves before the end of the year -- and filing promptly can also reduce the chance of taxpayer ID theft.
This post comes from Gerri Detweiler at partner site Credit.com.
But this year will be different. I am actually already starting on my 2013 taxes in 2013 (what a concept!) - and you may want to do the same. Yes, we're into the busy holiday season, and no, you may not have all of the information you need to complete them if you're waiting for W-2s or 1099s. But there are some good reasons to get started now and here are three of them.
Changes in tax laws will hit Americans who make more than $200,000 a year.
Recent tax law changes will hit the wealthiest Americans harder than others when they file their taxes in the next few months, thanks to new Obamacare taxes and increases in overall tax rates and capital gains taxes.
For most income groups, the United States still has historically low tax rates and lower wage earners don't have as much sympathy for those at the other end of the income spectrum. That doesn't mean the top tier isn't feeling the pain. The tax rate increases begin to kick in for couples earning $250,000 or individuals making $200,000 per year.
"That is not rich," says Phoenix-based CPA Donna Esposito, a senior director of tax services for a large consulting firm, who says changes in regulations have upset both her relatively affluent and her extremely wealthy clients. "The regulations are so complex, it's overwhelming."
Several factors are making this year particularly painful: there are four major tax increases that went into effect this year, plus the end of Bush-era tax cuts reinstated phase-outs for itemized deductions and personal exemptions. Here are some of the new or higher taxes high-income earners will see this year:
After Democrats and Republicans hammered out a 2-year deal that drew criticism from right-wing groups, they warily turned their eyes toward tax policies.
This post comes from David Francis at partner site The Fiscal Times.
Rep. Paul Ryan (R-Wisc.) carefully defended the narrow, two-year bipartisan budget deal he negotiated with Sen. Patty Murray (D-Wash.). The bill, which passed the House Thursday by a 332-94 margin, was blasted by conservative groups like FreedomWorks and the Club for Growth.
Other possible 2016 candidates, like Senator Marco Rubio (R-FL), have also distanced themselves from the deal.
House Speaker John Boehner publicly lashed out at those groups Thursday, saying they had "lost all credibility." Those comments, and the tone they were delivered in, highlighted the fragmented state of the Republican Party, or what many have referred to as a civil war within the GOP.
"I think John just kind of got his Irish up," Ryan said on NBC when asked about Boehner’s comments. "He was frustrated that these groups came out in opposition to our budget agreement before we’d reached a budget agreement."
Ryan admitted he "was frustrated too," but struck a much more conciliatory tone than Boehner had regarding those conservative groups.
Wealthy Americans contribute most of the levies collected from federal personal income. But that's not the whole story.
This post comes from Josh Barro at partner site Business Insider.
CNBC ran a story Thursday with the headline "The rich do not pay the most taxes, they pay ALL the taxes."
The story has thousands of Facebook shares. And its premise is completely false.
The article goes on to present data regarding the federal personal income tax, which is indeed paid almost entirely by people with high incomes. People with low incomes pay negative federal personal income taxes (that is, the government sends them checks) because of the earned income tax credit.
But "taxes" are not the same thing as "federal personal income taxes." The federal personal income tax only made up 28 percent of all U.S. government tax collections in 2012. Federal, state and local governments collected $4 trillion in taxes last year; just $1.1 trillion of that was federal personal income tax.
And people with low incomes who don't pay federal personal income tax do pay lots of those other taxes: payroll tax, state income tax, sales tax, property tax, excise taxes, and more. They pay other taxes indirectly: Workers bear the burden of employer-paid payroll taxes and part of the burden of corporate income taxes.
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