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Preparing for a Visit from Uncle Sam

Death, taxes and childbirth! There’s never any convenient time for any of them.”  ~ Margaret Mitchell, Gone with the Wind

Was this the year…

…You retired?

…You bought a house? You sold a house?

…You had a child? Your child moved out?

…You withdrew from your IRA? You got your pension?

…You started taking Social Security?

…You got divorced or had a spouse that died?

…You bought a business? You closed a business? You sold a business?

…You bought an investment? You sold an investment? You cashed in Savings Bonds?

Any of all of the above may affect what you owe the IRS or what they will owe you.

I make it a rule to not give the IRS more than I have to, especially in advance; but I also don’t want any surprises in April, and I don’t want to find I owe them more than I anticipated. To be sure I am on track my accountant does a mock return in the fall. She reviews those items that might add to my tax burden and reviews those items that might give me a tax break. Then she projects what this all might look like come tax time next year.

If I am on track we are good. If I have over paid, I stop withholding (more money for Christmas gifts). And if I am behind, I have months to catch up instead of grasping for a lump sum of funds on April 15th.

This is particularly important if you are withdrawing from an IRA. You may be withholding taxes, so the hope is that you are on track. But if you are withholding more than necessary, you will only be paying taxes on money that could have continued to be tax deferred, saving you taxes.

So reach out to your accountant or CPA and ask them to do a mock return. If you do not have an accountant, we will be glad to refer you to one of the trusted professionals who are part of our Resource Group.

And by the way, if the whole tax structure makes you question your intelligence, remember it was Albert Einstein who said, “The hardest thing in the world to understand is the income tax.”