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    BP Holdings Tax Management, Year-end tax tips for retirees and preretirees

    4 years agoReply
    Source Link: marketwatch.com/story/year-end-tax-tips-..

    Black Friday already? Where did the year go? The good news: No matter whether you’re retired or on retirement’s doorstep, there’s plenty you can do before the end of 2013 to avoid giving Uncle Sam more than his fair share of your hard-earned income.

    Here’s a laundry list of what experts suggest:

    Do a dry run

    Lest you do something that you might regret later on, consider taking stock of where you are and where you want to be with your tax return. “The last couple of months of the year is an excellent time to do a dry run on your tax return,” said Andrea Blackwelder, president of Wisdom Wealth Strategies. “By November or December, we have a fairly accurate idea of our income and deductions. However, the timing also provides ample time to take advantage of tax-saving strategies, such as last-minute 401(k) contributions, tax harvesting and charitable contributions.”

    For newly minted retirees, Blackwelder said, this tax analysis can be incredibly important. “New retirees often fail to fully understand how to manage taxes in retirement,” she said. “If withholding instructions on Social Security, pensions and IRA withdrawals aren’t accurate or sufficient, investors may pay penalties and interest at tax time.”

    By doing a dry run and getting sense of what you might owe Uncle Sam, Blackwelder said retirees can clean up any underpaid taxes by using a critical tax strategy provided by IRAs. For instance, IRA account owners may make a distribution and withhold the entire amount for taxes, she said. “The IRS does not consider the payment late, but rather considers it as taxes paid throughout the year,” said Blackwelder.

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