That’s right, it is almost here. Tax Day. April 16, 2016. Lucky for us, we have Drew Boyer on our side. The following is an article he wrote for us to help us along through tax time and the rest of 2016.
Monday, April 16, 2016 is tax day.
Here are some financial tips to see green.
Last–minute tips for 2015
1. File on time to avoid penalties!
It’s a day later this year because the 15th falls on a Sunday.
2. Double check all of your information is correct.
Especially your math. If you’re off, you’re going to be hearing from the IRS.
3. Make a IRA contribution before April 16th.
You will get $1 for $1 deduction for last year even though you’re contributing this year. That’s great tax math. Sorry, but ROTH IRA’s are not tax-deductible.
- 2015 Maximum Annual IRA limits are:
Under Age 50 = $5,500
Over Age 50 = $6,500
This option gets your taxes filed sooner and if you’re owed a return (see #4 below), you’ll get your $’s much sooner through a direct deposit.
*From this writer’s opinion, before you consider this, consider the fact that the IRS is a huge hacker target. But… I’m sure it’s not as bad as the government is telling you. I’m still a fan of ‘paper.’
Pre-Planning tips for 2016
1. *Firefighter Expenses and Reimbursements.
Firefighters may receive amounts that are designated as expenses for transportation, equipment, clothing, etc. In general, these are treated as taxable wages. However, if the amounts are paid under an accountable plan, they may be excluded from wages and no tax reporting is required. For payments to be considered made under an accountable plan, the employees must:
- Incur the expenses in the performance of work;
- Adequately account for the expenses within a reasonable period of time; and
- Return any amounts in excess of expenses within a reasonable period of time.
Ordinary and necessary expenses firefighters incur in the course of performing their jobs are excludable from income if paid under an accountable plan. A fixed cash amount which does not require documentation of expenses, regardless of its purpose, is treated as ordinary wages. It is subject to income tax, social security and Medicare tax withholding.
*Above information is re-printed word-for-word from the IRS website:
For a detailed explanation of the accountable plan rules, see Section 5 of Publication 15
2. Max-out your retirement plan at work.
You get a $1-for-$1 deduction with a much higher maximum contribution limits than an IRA. That’s GREAT tax math.
- 2015 Maximum Annual Qualified Retirement Plan limits are:
Under Age 50 = $18,000
Over Age 50 = $24,000
3. Are you a dually-employed Public Employee?
Which retirement plan is best to contribute too? The answer: The one where you are paying Social Security taxes. Usually, this is your part-time employment. The Windfall Elimination Provision of 1982 can reduce a public employee’s Social Security Benefit to just 34% of what your Social Security statement shows. Therefore, contribute as much of that income directly into retirement savings so your SS taxes will be reduced.
4. Check your exemptions and deductions.
Getting a large tax return back doesn’t make you a genius, it’s make you someone who likes giving the government an interest-free loan! Get more income per pay now and save it in your retirement and/or your savings account for later.
5. Donate your old, re-useable stuff.
Clean out your closet, basement, and garage. My wife instituted the 1 year rule for our family- if you haven’t worn it or used it in the past year, get rid of it.
6. Year-end Bonuses/Cash-outs.
Try to defer the entire amount into an eligible retirement account, up to the legal limits. If you can’t do that and IF you’re anticipating making less income next year than this year, defer the bonus until after January 1, 2017. Your income gets spread out and you should keep more of your hard-earned $’s in your pocket.
As always, consult your own tax, financial, and legal advisors for what is best for your own individual situation. Good Luck!
Drew W. Boyer is a licensed financial and investment advisor specializing in First Responder’s investment options, pension guidance, and financial/retirement planning for over 12 years. Drew lives and works in Columbus, OH with his wife Johanna and their daughters, Lena and Elise. Drew also serves as the financial voice on the board of the 24-7 Commitment Foundation.
This article is the author’s opinions alone and is not intended for financial, tax, or legal advice. Please consult your own financial, tax, and legal advisors to make informed, personal decisions. Drew W. Boyer is a Registered Representative with Fortune Financial Services, Inc., Member FINRA/SIPC, and a practicing Investment Advisor Representative and Managing Partner at Parallel Equity Advisors, Ltd. Fortune Financial Services, Inc. and Parallel Equity Advisors are separate entities.
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