Having a plan or road map as you accumulate your wealth is an
extremely important first step but sometimes if you do not have a working
knowledge of some of the investment vehicles that are available then it is
prudent to seek help. As we grow our
needs change and with these life-changes the necessity to review your financial
situation on a yearly basis makes more sense at the time we prepare our tax returns.
While IRAs (Individual Retirement Accounts), Roth IRA, SEP IRA and
Simple IRA are very useful as retirement accumulation vehicles, they come with
a set of complicated rules and regulations that one has to abide by if one is
to make use of the intended benefits. Take
for an example if in prior years one might have been eligible to make
contributions to an IRA it is not a given that you can continue to do so in
future years without checking your eligibility. It is essential that you
confirm your eligibility to make contribution in any given year before the
funds are deposited into your IRA account and also that the corresponding
deduction is appropriately reported on your tax return. The Internal Revenue Service (IRS) permits you to
correct erroneous contributions through a request for a withdrawal of excess contribution
which you can make through your broker or mutual fund. Whether this is done prior to filing your
tax returns for the tax year in question or after and any corresponding earnings are
reported in the tax year of the correction.
While correcting over-funding might seem unnecessary work at first,
it quickly becomes a costly oversight when taking the distribution out of your
retirement you receive a Form 1099-R and the stated taxable amount is a lot higher than what
you recall. The IRS will require that you show proof of what amount is taxable and what amount is
not taxable, failing to do this will result in the full amount being taxable.
No one wants to pay more taxes than is absolutely necessary but worse
still you do not want to pay taxes twice because you failed to keep your
adequate records.
Items of special note:
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