When you turn 65, the way you file taxes changes. Consequently, it may not be a bad idea to brush up tax policy to see how you can benefit from tax issues brought on from Social Security and IRA withdraws.
Here are some tax filing basics that are increasingly important the closer you get to retirement age.
- Follow the Law. There are resources available to help you stay current on tax law changes like catch-up contributions. Ignoring these means you could potentially miss out on otherwise beneficial tax breaks.
- Embrace Status Change. When you turn 65, you’ll be eligible for certain credits and deductions and be able to take a higher standard deduction. Conversely, once you reach this age, certain credits and deductions will no longer apply to you. The difference between a senior and a retiree is in the fine print, and it might make sense to consider estimated quarterly taxes once you’ve finished your career of full time work.
- Stockpile Your Resources. There are certain rules regarding annuity income and collecting pensions, IRAs, civil service or military benefits, and more. The IRS’s website is stocked with information to help retirees and seniors navigate taxes, and the IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly offers free tax help to individuals over 60. Additionally, there are nonprofit accounting and tax organizations that provide assistance on tax planning and preparation.
- Reinterview the Pro. Despite a lengthy relationship with your accountant, you may need to have an awkward conversation where you inquire whether he or she is experienced in servicing clients in your similar situation. You may consider a new accountant who has extensive experience in working with retirees. If this is the case, it may be smart to seek out an enrolled agent. As your tax filing becomes more complex, you’ll want a professional who has extensive experience.
- Tighten You Defenses. Most contact from the IRS will occur through snail mail. It is highly unlikely that an agent would call you and ask for an immediate payment via credit card or wire transfer. This being so, it is never a good idea to give your Social Security number, credit card number or other personal information to anyone who calls you claiming to be from the IRS.
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