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People often assume retiring will simplify their tax situation. In reality, though, it merely modifies it. Stepping out of the workforce is a major change, but one that can have positive benefits for tax purposes if you follow a few guidelines. To maximize your tax benefits and reduce financial stress following retirement, keep the following tax preparation tips in mind.

How to Make Tax Season Easier After Retirement

1. Determine Your Minimum Withdrawal Requirements 

If you have an IRA or 401(k), you must start withdrawing funds annually upon turning 70 and a half. Otherwise, the IRS will penalize you for 50% of the amount you should have withdrawn. Fortunately, there are various online calculators that can help you determine exactly how much you must take out every year to avoid this hefty penalty. 

2. Diversity Your Sources of Income 

If you pull from different types of accounts to make ends meet, it will reduce your total tax burden when it comes time to file. For example, if you have access to both taxable and nontaxable accounts, it may be advisable to take most of what you need for daily living from nontaxable accounts. Then, take the minimum required distribution from each taxable account to avoid the penalties mentioned above. 

3. Consider Relocating to a More Retirement-Friendly Statetax preparation

If you have the flexibility to move to another state, doing so could help stretch every dollar, especially when filing your annual tax return. To make the move as lucrative as possible, consider factors like the state’s cost of living, income tax rate, and property tax rate. There also happen to be 13 states that do not tax Social Security or private pension income.  

 

If you recently retired or you're planning to leave the workforce soon, turn to The Callen Accounting Group, PLLC for tax preparation help. Located in Mountain Home, AR, they’re proud to be one of the leading firms for both individuals and businesses in the Twin Lakes area. When you turn to them for guidance, you can be sure they’ll go above and beyond to protect your financial interests. To learn more about their tax preparation services, visit the website or call (870) 425-6066 today.

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