- 70-1/2 or Older? Avoid an IRS Penalty by Taking the Correct Retirement Plan Distribution
- If you are age 70-1/2 or older and have a traditional IRA, a 401(k), or a SEP IRA, the tax law requires you to take at least a minimum amount – referred to as the required minimum distribution (RMD) – from those accounts each year. The tax code does not allow taxpayers to keep funds in their qualified retirement plans indefinitely. Eventually, assets must be distributed, and taxes must be paid on those distributions. If a retirement plan owner takes no distributions or if the distributions are not large enough to satisfy the amount the law requires, he or she may have to pay a 50% penalty on the amount that is not distributed.
- Are You Subject to Self-Employment Tax?
- Self-employed individuals, unlike employees, don’t have someone withholding Social Security or Medicare (FICA) taxes along with pre-payments toward their federal (and state, where applicable) income tax from their wages during the year.
- Earned Income Tax Credit: Used, Abused and Altered
- Any discussion of the earned income tax credit (EITC) needs to begin with a discussion of why Congress created it in the first place. It has a twofold purpose: first, as an incentive for people to work and get off public assistance, and second, to provide financial assistance for low-income taxpayers and their families based upon their income from working, which the tax code refers to as “earned income.” When originally created back in 1979, it even allowed taxpayers to obtain the credit in advance through their employer’s payroll payments, based on projecting the credit they would be entitled to on their tax return for the year. This was referred to as advanced EITC. However, because of the many problems associated with the advanced payment credit, it was repealed for years after 2010.
- Who Owes You? 5 QuickBooks Online Reports That Can Tell You Fast
- Keep a constant watch on your accounts receivable to improve cash flow.
- Tax Issues Related to Hobbies
- Generally, when individuals have a hobby, they have it because they enjoy it and are not involved in their hobby with the goal of making money. In fact, most hobbies never make money or don’t even create any income, for that matter. Tax law generally does not allow deductions for personal expenses except those allowed as itemized deductions on the 1040 Schedule A, and this also applies to hobby expenses.
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