As the end of the year approaches, many of us start thinking about taxes. While it might not be the most exciting topic, a little tax planning can lead to significant savings. Think of it like preparing for a fishing trip. You would not just show up at the water with a random lure or fly. You would choose the right fly for the fish you want to catch. Similarly, selecting the right year-end tax strategies can help you secure your financial future and maximize your refund.

We understand that navigating tax laws can feel complicated. That is why we have put together this guide to break down smart, actionable tax-saving ideas. Whether you plan to itemize your deductions or take the standard deduction, there are steps you can take to lower your tax bill.

Key Strategies for Everyone

Certain tax-saving moves are beneficial regardless of whether you itemize or take the standard deduction. These strategies focus on “above-the-line” deductions, which reduce your adjusted gross income (AGI), and tax credits, which directly lower the amount of tax you owe.

Maximize Your Retirement Contributions

One of the most powerful tools for tax savings is contributing to a tax-deferred retirement account. Money you put into a traditional 401(k) or a traditional IRA is often deductible, meaning it lowers your taxable income for the year.

For example, if you are in the 22% tax bracket, every $1,000 you contribute to your traditional 401(k) could save you $220 on your tax bill. It’s a win-win: you save for your future while reducing your taxes today. Check the annual contribution limits and aim to contribute as much as you can before the deadline.

Contribute to a Health Savings Account (HSA)

If you have a high-deductible health plan, an HSA is an incredible triple-tax-advantaged account.

• Contributions are tax-deductible: The money you put in lowers your taxable income.

• The money grows tax-free: Any interest or investment gains are not taxed.

• Withdrawals are tax-free: You can take money out for qualified medical expenses without paying taxes.

An HSA is a great way to plan for future healthcare costs, which can be a significant concern in retirement. By contributing now, you secure funding for future medical needs and receive an immediate tax break.

Harvest Tax Losses in Your Investment Portfolio

Did some of your investments lose value this year? While nobody likes seeing their portfolio go down, you can turn those losses into a tax-saving opportunity through tax-loss harvesting. This involves selling investments at a loss to offset capital gains realized from selling other investments at a profit.

If your losses are greater than your gains, you can use up to $3,000 of the excess loss to reduce your ordinary income. This can be a smart way to manage both your portfolio and your tax liability.

Make a Qualified Charitable Distribution (QCD)

If you are age 70½ or older (yes, even if you are not yet required to take RMDs), you have a unique opportunity to make a big impact while saving on taxes. A Qualified Charitable Distribution (QCD) allows you to donate up to $100,000 directly from your IRA to a qualified charity.

A QCD is especially powerful because the distribution counts toward your Required Minimum Distribution (RMD) but is not included in your taxable income. A QCD can help keep your income lower, which may prevent your Social Security benefits from being taxed or stop you from being pushed into a higher tax bracket.

Strategies If You Take the Standard Deduction

The standard deduction has increased significantly in recent years, meaning more people choose it over itemizing. If you fall into this group, you can still find plenty of ways to save. The key is to focus on the above-the-line deductions and credits mentioned earlier, as they don’t require you to itemize.

Here’s a quick recap of the best moves:

• Contribute to a Traditional IRA or 401(k): This is one of the most effective ways to reduce your taxable income directly.

• Fund Your HSA: Take advantage of the triple tax benefits to save for healthcare costs.

• Look for Tax Credits: Credits are more valuable than deductions because they reduce your tax bill dollar-for-dollar. Explore credits like the Child Tax Credit, education credits (American Opportunity Credit, Lifetime Learning Credit), and energy-efficient home improvement credits.

• Deduct Student Loan Interest: You may be able to deduct the interest you paid on student loans, up to a specific limit.

Strategies If You Itemize Deductions

If your total deductible expenses exceed the standard deduction, itemizing is the way to go. This allows you to deduct a variety of specific expenses, potentially leading to substantial tax savings. Think of it like having more than one type of fly in your tackle box—it gives you more options to get the job done.

Bunch Your Charitable Contributions

One popular strategy is “bunching.” Instead of making smaller annual donations, you can combine several years’ worth of charitable giving into a single year. Bunching can push you over the standard deduction threshold for that year, allowing you to itemize and get a larger tax benefit. In the following years, you can simply take the standard deduction.

For example, if you usually donate $5,000 a year, you could donate $15,000 (paired with a donor-advised fund) in one year and then skip the next two. This larger donation, combined with other itemized deductions, might provide a much greater tax benefit than three smaller, separate donations.

Prepay Deductible Expenses

You can increase your itemized deductions by paying for certain expenses before the December 31 deadline.

• State and Local Taxes (SALT): You can deduct property, state, and local income or sales taxes, up to a combined total of $40,000 per household. Consider paying your fourth-quarter estimated state income tax payment in December instead of January.

• Mortgage Interest: Making your January mortgage payment in December allows you to deduct the interest portion on this year’s tax return.

• Medical Expenses: You can deduct medical expenses that exceed 7.5% of your AGI. If you are close to this threshold, consider scheduling and paying for any needed medical or dental procedures before the end of the year.

Plan for Tomorrow, Today

Tax planning is not just about last-minute scrambling. It’s about making thoughtful decisions throughout the year to put yourself in the best possible financial position. By using these strategies, you can navigate retirement confidently, knowing you are making the most of your hard-earned money.

We recommend reviewing your financial situation with a professional who can provide personalized guidance. With a solid plan, you can reduce your tax burden and secure greater peace of mind for the years to come.

Don’t wait to secure your financial future.  To discuss how these tax-saving strategies can work for you. Let’s plan for your tomorrow, together.

Book an appointment with us today

The post Smart Tax Planning Ideas for Year-End first appeared on Stalwart Financial Planning.

You’re nearing retirement age, and you’ve been diligently contributing to a traditional IRA for years. But you’ve recently realized that you may be in a higher tax bracket when you retire than you are now. What could you have done to reduce the taxes you’ll pay on your retirement savings?

Roth IRA Option

One option is to have considered a Roth IRA. With a Roth IRA, you pay taxes on the money going into your account, but all future withdrawals are tax-free. So if you think your marginal taxes will be higher in retirement than they are right now, a Roth IRA may be a good choice.

• Taxes – Think Tax-Free
• Income Limits
• RMDs (Required Minimum Distributions)

Roth IRA and Taxes (Think Tax-free)

Here are a few things you can do to ensure you get the most out of your Roth IRA. First, contribute as much as you can each year to your Roth IRA if a direct contribution is allowed.

The deductible amount that you can contribute changes periodically. In 2023, the contribution limit is $6,500 a year—unless you are age 50 or older, in which case, you can deposit up to $7,500. So if you can, take advantage of the higher contribution limit.

Second, be aware of the five-year rule. With a Roth IRA, you can withdraw your contributions at any time, tax-free and penalty-free. But if you want to withdraw your earnings, you must wait until you’re 59 1/2 years old and have held the account for at least five years. So if you’re close to retirement, ensure you won’t need to access your earnings before turning 59 1/2.

To contribute to a Roth IRA, you must have earned income. If you’re retired and have no earned income, you can’t contribute directly to a Roth IRA. But there’s still a way you can get money into a Roth IRA: by converting your traditional IRA into a Roth IRA. You will have to pay taxes on the amount you convert, but if you think your marginal tax rate will be lower in retirement than it is now, it may be worth doing. And remember, once the money is in a Roth IRA, all future withdrawals are tax-free. Talk to your financial advisor to see if a Roth IRA suits you. They can help you decide whether to contribute to a Roth IRA, convert your traditional IRA, or do both. They can also help you determine how much you can contribute and the tax implications.

Finally, remember that a Roth IRA is a great way to pass wealth to your heirs. With a traditional IRA, your heirs will have to pay taxes on the money they inherit. But with a Roth IRA, your heirs can withdraw the money tax-free. So a Roth IRA is a good choice if you’re looking for a way to minimize the taxes your heirs will have to pay.

Roth IRAs and Income limits

If your modified adjusted gross income (MAGI) is above a certain amount, you may be unable to contribute to a Roth IRA. In 2023, the contribution limit begins to phase out for singles with MAGI of $138,001 or more and married couples filing jointly with MAGI of $218,001 or more. If your MAGI is above these limits, you may still be able to contribute to a Roth (tax-free) type plan if your employer offers a retirement plan such as a 401(k) and you meet certain other conditions.

Roth IRA and RMDs

Another advantage of a Roth IRA is that there are no required minimum distributions (RMDs) during the account holder’s lifetime. With a traditional IRA, you are required to start taking distributions at age 73. But with a Roth IRA, you can leave your money invested for as long as you want. This can be a great way to maximize the growth of your account and minimize the taxes you’ll owe in retirement.

Conclusion

A Roth IRA can be a great way to save for retirement. It offers tax-free growth, and there are no required minimum distributions during the account holder’s lifetime. So if you’re looking for a way to minimize the taxes you’ll owe in retirement, a Roth IRA is a good choice.

The post Get the Most From Your Roth IRA first appeared on Stalwart Financial Planning.

Jane, a 74-year-old retiree, had enjoyed a comfortable and financially secure retirement for the past few years. With each passing year, however, her tax burden was growing due to a steady increase in Required Minimum Distributions (RMDs) from her IRA account. To ease this strain, Jane recently learned about Qualified Charitable Distributions (QCDs) and decided to take advantage of the tax benefits they offer. By taking a QCD, she was able to direct her RMD funds directly to her favorite charity while also avoiding paying taxes on them. Thanks to this simple solution, Jane’s financial life is now less complicated—and she can feel great about supporting a cause close to her heart.

If you’re looking for a way to reduce your taxes in retirement, you may want to consider making Qualified Charitable Distributions (QCDs) withdrawals from your IRA. QCDs can be an effective way to lower your tax bill and support the charities of your choice. Here’s what you need to know about how QCDs work.

How to use a QCD to reduce your taxes

Taking advantage of tax breaks is crucial to reducing the amount you owe. Qualified charitable distributions (QCDs) are one tool that can help save you money by allowing individuals aged 70½ and older to transfer up to $100,000 from their IRA accounts each year to charitable organizations. A QCD could reduce your taxable income and overall tax bill when done correctly. The donation must be made directly from the IRA custodian to an IRS- approved charity to qualify for this tax break. The money cannot be given directly to you first. The process may seem complicated initially, but it doesn’t have to be. Implementing a QCD could lead to significant savings by reducing some or all of your current taxable income on IRA distributions! Working with an experienced financial planner or accountant can help ensure that all requirements are met. This way you get every possible benefit from using a QCD as part of your overall tax strategy.

What is a QCD, and how does it reduce taxes on RMDs?

A qualifying charitable distribution (QCD) is an often-overlooked way for people over 70½ to make tax-advantaged charitable contributions. By taking advantage of a QCD, individuals can receive an income tax deduction of up to $100,000 of their required minimum distribution (RMD), which reduces the taxable portion of their income and any associated taxes due. To take advantage of this possibility, you must donate directly from your IRA account, payable to a qualified charity. Gifts from other retirement plans are not eligible for QCDs. Furthermore, the donation wouldn’t be subject to the usual limits on itemized deductions or the additional restriction imposed due to higher AGI levels. Also, it is advisable to make sure you have documentation of your donation for future IRS reference and for review by your financial advisor to confirm that you meet all eligibility requirements. Whichever method you use, remember that a QCD can get you substantially greater savings than itemized deductions without burdening you with additional paperwork or effort: it’s something any serious donor should consider when planning their charitable giving strategy.

What are the benefits of a Qualified Charitable Distribution?

A QCD (Qualified Charitable Distribution) can be an excellent way to make a tax-free donation. Donating money directly from your retirement account allows you to bypass taxes on the donation amount and make it go further for the causes you support. QCDs also provide additional benefits, such as maintaining the funds in your retirement account so that you have more control over your investments. Moreover, they may reduce your taxable income and corresponding tax rate, thus potentially leaving more money in your pocket at the end of the year. Finally, QCDs can assist in managing mandatory minimum distributions (RMDs) that may otherwise apply when taking money out of a retirement account. All these factors can make a QCD an attractive option for those wishing to contribute to their favorite charities or non-profits. Additionally, since there are no limits on the number of times one can do a QCD in a year, they are an effective way to ensure significant donations over time with minimal financial burden. So if you’re looking for an efficient way to help those in need and maximize your contributions, a QCD could be a great solution.

How to make sure your QCD is tax-deductible

Qualified Charitable Distributions (QCDs) are an excellent way for retirees to reduce their taxable income easily. It is important to have the right strategy to ensure that your QCD is tax-deductible. First, you need to make sure you meet the eligibility requirements. First, you must be at least 70 1/2 years old and have funds stored in an Individual Retirement Account (IRA). Additionally, some retirement plans do not qualify, so checking with your provider before investing is important. Next, you’ll want to ensure that your charitable organization is eligible for tax-deductible donations – if in doubt, contact the charity directly or check their website for more information. Finally, make sure your withdrawal amount does not exceed $100,000 per year – going over this limit may render part of your donation non-tax deductible. By following these tips, you can rest assured that your QCD will be as tax-efficient as possible!

FAQs about QCDs

QCDs, or Qualified Charitable Distributions, are an excellent way for retirees to donate annually to their favorite charities. In contrast to regular tax-deductible contributions, QCDs forgo withdrawing the funds for your accounts, incurring the tax, and then contributing to a charity to get the deduction. The donor can designate up to $100,000 per year in QCDs, making this an accessible way for retirees to make sizable donations throughout their retirement years. As with other tax matters, QCDs come with specific rules and regulations that are vital to be aware of. For example, QCDs must come from traditional IRAs or Roth IRAs and cannot be taken from 401(k) accounts or SEP IRAs. Instead, a QCD allows the money to go directly from your IRA account into the charity of your choice.

Furthermore, all distributions must take place after age 70½ to qualify as a QCD. It is essential to keep in mind that you can benefit from a QCD even if you itemize or take the standard deduction on your taxes. These rules can help maximize the amount of charitably donated funds without any additional taxation. Ultimately, understanding the requirements and benefits of QCDs can ensure those nearing retirement ages have all the information needed when it comes time for them to make their charitable donations during retirement.

Summary

A Qualified Charitable Distribution (QCD) is a powerful tool that can be used to reduce your taxes and support your favorite charities. QCDs have the dual benefit of reducing your taxable income and supporting the causes that are important to you. If you are over 70½ and have an IRA, you can use a QCD to make charitable gifts directly from your IRA. If you have questions about QCDs, contact a Certified Financial Planning Professional today.

The post Qualified Charitable Distributions (QCDs) to the Rescue first appeared on Stalwart Financial Planning.

You’ve just had a tough year. Your investments have taken a beating, and you’re looking at a pretty hefty tax bill come April. But there’s a silver lining – you can use tax-loss harvesting as an investment strategy to offset some of that taxable income.

Tax-loss harvesting is a technique that involves selling losing investments to realize the losses for tax purposes. Doing this can offset some of the gains from your other investments, which can help lower your overall tax bill.

Tax-loss harvesting may be a good strategy if you’re looking to reduce your taxes this year.

What is tax-loss harvesting, and how does it work?

Tax-loss harvesting is a strategy investors can use to offset capital gains and reduce their tax bills. It works by selling securities that have decreased in value and using the losses to offset any gains from other investments. For example, let’s say you have a stock with a long-term capital gain of $10,000 after you sold it. You also own another long-term stock holding that has decreased in value by $5,000. If you sell the second stock, you can use the $5,000 loss to offset some of the $10,000 gain, resulting in a net gain of $5,000. Tax-loss harvesting can be an effective way to reduce your tax liability. Tax-loss harvesting only works in taxable accounts, so it will not work in accounts such as IRAs. Still, it’s important to consult a financial advisor to determine if it’s the right strategy for you.

The benefits of tax-loss harvesting

Tax-loss harvesting is a strategy investors use to minimize their taxable capital gains. By selling lost value investments, investors can offset some of the taxes they would otherwise owe on their profits. While tax-loss harvesting can be complex, the basic idea is simple: Investors can reduce their overall tax bill by selling losing investments and reinvesting the proceeds in similar but lower-priced assets.

Tax-loss harvesting can effectively reduce your tax liability, but it’s essential to understand the rules before you begin. For example, you can only offset capital gains with capital losses, so if you don’t have any gains to offset, tax-loss harvesting won’t help you. And if you plan to sell an asset soon anyway, it may not make sense to wait until it loses value just for the tax benefits. However, if you’re disciplined about only selling losing investments and have a long-term investment horizon, tax-loss harvesting can be a valuable tool for minimizing your taxes. 

How to do tax-loss harvesting yourself

Tax-loss harvesting is a strategy that investors use to minimize their capital gains taxes. By selling securities that have lost value, investors can offset any capital gains they may have incurred during the year. To be eligible for tax-loss harvesting, investors must have held the security for at least one year. Short-term losses can be used to offset short-term gains, while long-term losses can be used to offset long-term gains. This strategy can be used to lower your tax bill, but it’s important to consider the cost of the transaction and the effect it will have on your investment portfolio. Here’s what you need to know if you’re thinking of using this strategy.

First, you’ll need to identify which securities in your portfolio have lost value. Identification can be made by looking at your investment statements or speaking with your financial advisor. Once you’ve identified the lost value securities, you’ll need to decide how much you’re willing to sell. Selling too much of a security can trigger a capital gains tax, so it’s important to talk with your financial advisor about the best way to maximize your tax savings. Finally, you’ll need to execute the sale and report it on your taxes. If you have questions about how to do this, speak with a tax professional. You can successfully harvest your losses and lower your tax bill by taking these steps.

Things to keep in mind when doing tax-loss harvesting

Doing your taxes can be complex and time-consuming, but you must ensure you get all the deductions and credits to which you are entitled. One way to do this is by taking advantage of tax-loss harvesting. Tax-loss harvesting involves selling investments at a loss to offset capital gains from other investments. There are a few things to remember if you’re considering tax-loss harvesting. First, staying within the IRS guidelines is crucial to avoid penalties. Second, you need to ensure you have accurate records of your transactions to deduct the losses on your taxes. Finally, you should consult a financial advisor to ensure that tax-loss harvesting suits your situation. You can make the most of this valuable tax strategy by following these tips.

The potential downsides of tax-loss harvesting

Tax-loss harvesting is a strategy investors can use to offset capital gains taxes by selling investments at a loss and reinvesting the proceeds. While tax-loss harvesting can effectively reduce your tax bill, there are also potential downsides to consider. First of all, tax-loss harvesting can only be used to offset capital gains. If you have losses from other sources, such as salary or business income, you cannot use tax-loss harvesting to offset those losses. Furthermore, you can only use tax-loss harvesting if you have held the investment for at least one year. Finally, it’s important to remember that tax-loss harvesting is a taxable event, so you will still owe taxes on any gains you realize from the sale of the investment. Despite these potential drawbacks, tax-loss harvesting can be a valuable tool for investors looking to minimize their tax liability.

When is the best time to do tax-loss harvesting?

Tax-loss harvesting is selling investments at a loss to offset capital gains. It can effectively reduce your tax bill, but it’s important to understand the rules and timing associated with the strategy. First, you can only offset capital gains with capital losses. If you don’t have any gains for the year, then there’s no need to harvest losses. Second, you can only deduct up to $3,000 in losses yearly. Any losses beyond that can be carried forward to offset future gains. Finally, it’s generally better to harvest losses near the end of the year, so you have 12 months to reinvest the proceeds. By following these guidelines, you can maximize the benefits of tax-loss harvesting while minimizing the risk of running afoul of the IRS.

Summary

Tax-loss harvesting can be a great way to offset some of your capital gains and reduce your tax bill, but it’s important to understand how it works and the potential downsides before you start. If you’re comfortable doing your taxes, then tax-loss harvesting is something you can do yourself. Just keep an eye on the overall picture and ensure you’re not jeopardizing your financial goals in the process.

The post Tax-Loss Harvesting first appeared on Stalwart Financial Planning.

I am sure you heard about the debate our elected officials were having over the future of the tax code in North Carolina.  On July 24^th, Governor Pat McCrory signed the new tax changes into law.  Do you know how these changes will affect you starting in 2014?

Here is a summary of the changes:

Personal Income Tax

• Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015

• Increases the standard deduction for all taxpayers, applied to the first “X” amount of income:
  • $15,000 for those married filing jointly
  • $12,000 for heads of household
  • $7,500 for single filers

• Retains the state child tax credit and increases it for families making less than $40,000
• Offers a $20,000 combined maximum deduction for mortgage interest and property taxes
• Makes charitable contributions fully deductible
• Protects all Social Security income from state taxes

Corporate Income Tax

• Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015
• If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017

Other Highlights

• Caps the gas tax
• Eliminates the estate tax

The Tax changes will also end the “North Carolina Tax Free Weekend”.  The tax free weekends have been a popular time for people to purchase “Back-to-School clothing, schools supplies and computers”.  August 2 – 4 will be the last North Carolina Tax Free Weekend.

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The post Tax Changes Coming to North Carolina first appeared on Stalwart Financial Planning.

What do you plan to do with your tax refund?  Many people spend their tax refund on a whim.  I encourage you to put a little more thought into it.  Here are 5 ideas on how to spend your tax refund wisely.

1. Make your 2013 IRA contribution now
2. Contribute to a 529 Plan
3. Create Estate Documents
4. Payoff Credit Card debt
5. Get Financial Planning help for family

Put the entire refund amount toward funding your 2013 IRA contribution. You may contribute up to $5500 for an individual in 2013 (unless you are age 50+ then the maximum is $6500) into a Roth IRA assuming your income falls below the government thresholds.  The thresholds or phase outs for singles in 2013 is $112,000-$127,000 and for married couples, is $178,000-$188,000.  If you anticipate that your earned income for 2013 will be higher than the Roth IRA phase out thresholds, you can still contribute to a traditional IRA.

Start a tax-sheltered 529 college savings plan to fund your children’s or grandchildren’s educations. If you plan to pay private school tuitions through secondary school, you should consider funding a Coverdell Education Savings Account (ESA). The Coverdell phase-outs in 2013 are Single- $95,000-$110,000 and for Married Filing Jointly – $190,000-$220,000.

Use your refund money to engage the services of an estate-planning attorney. If you do not have a will then have one drawn up. Without a will issues such as child guardianship and disbursements of assets will not be decided by you, but rather by the laws of your state. For some families, additional estate planning documents may be needed.

If you have credit card debt, pay off as much as possible. For free credit reports go to www.annualcreditreport.com. Use part of the money to obtain your credit score from www.FICO.com (the rating that shows how credit-worthy you are). Correct any incorrect items on your credit report and work to keep your report clean.  To strengthen your credit score make your payments on time and do not take on more debt than you should. Try to live below your means.

Purchase a gift certificate, for a set amount of professional financial advice, for a loved one. If you do not want to pay for a complete financial plan, find a financial planner who like me works by the hour.  You can find other Hourly Fee-Only Financial Planners in your area by visiting the Garrett Planning Network.

What do you plan on doing with your tax refund?

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The post What to do with your Tax Refund first appeared on Stalwart Financial Planning.

For years, Alfred, has been providing quality, personalized guidance to local individuals and businesses. Alfred Jones, CPA’s expertise covers tax management and accounting services.

Here is the interview with Alfred Jones:

Isaac:   What are some of the most common mistakes self prepares make on their tax returns?

Alfred: Some of the most common errors that self-preparers make are:

• Math errors:   Many self prepares continue to prepare their returns by hand and do not add correctly.
• Failure to sign the return
• Failure to print legible
• Failure put items on the correct line.   The IRS computer will process the information that you have put on your return just as you have it.  Example: Taxpayer received only retirement income.  The retirement income was placed on line 7 where wages (only) should go.   The IRS processed the return showing only wage income and no retirement income.   The IRS then assessed income tax on the unreported retirement income.
• Failure to attach the appropriate W-2, 1099. Etc. that reflect withholding of income tax

 Isaac:   If you find a mistake in a previous year’s tax return, what should you do?

Alfred: If a mistake is found in a previous year’s tax return, the taxpayer should file an amended tax return to correct the mistake.   Please note that the IRS and the State of NC are both barred from issuing a refund 3 years after the due date (to include extensions) of the original return. 

Isaac:   That is good information to know.  How many years back can you amend a return? 

Alfred: Generally, in cases other than fraud, after 3 years, a tax return year is considered out of statute which bars assessment of additional tax by the taxing authorities

Isaac:   If you cannot get your tax return done by the April 15 deadline what should you do? 

Alfred: A taxpayer unable to complete a return by the April 15 deadline should make a timely request for an extension of time to file.   In North Carolina, application must be made to both the Internal Revenue Service and to the State of North Carolina Department of Revenue.   The extension is granted automatically.  The taxpayer isn’t required to sign the extension request, but it will only be granted if timely filed.

Isaac:   Do any special rules apply, if you are in the military and are deployed overseas?

Alfred: Yes, there are rules that apply only to enlisted personnel and other rules that apply to officers.  Enlisted personnel and Warrant Officers are not taxed on combat pay.   Commissioned officers have a limited exclusion.  Military personnel serving in noncombat zones are treated the same as military personnel in the continental United States.

I want to thank Alfred for sharing this information with us.  If you need help, preparing this year’s tax return or amending a previous year’s return, contact Alfred Jones at (910) 488-3144.

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The post Top 5 Mistakes on Tax Returns and More first appeared on Stalwart Financial Planning.

Did you know the contribution limits for 401Ks and IRAs increased for 2013?  With the Presidential Election in November and all the talk over the Fiscal Cliff, many people missed this announcement out of Washington.

For 2013, the 401K and 403(b) annual contribution limits went from $17,000 to $17,500.  The annual contribution limits for Traditional and Roth IRAs also rose from $5,000 to $5,500.

If you are age 50 or older at any time in 2013, you are eligible to contribute a catch-up amount of an additional $5,500 for 401Ks and 403(b) s.  For IRAs, the catch-up amount is $1,000.

You should do the following:

• Make adjustments to your paycheck to meet new limit for 401Ks and 403(b)s
• Make your Traditional IRA or Roth IRA contribution now

Now is the time to adjust the 401K contributions in your paycheck.  If you make these changes now, the increase in contributions can be spread out over the full year verse playing catch up at the end of the year.  If you are not able to make the maximum allowable annual contribution, you should contribute as much as possible.  The minimum you should contribute is enough to get the company match.  This is free money, so do not give it away!

Have you made your 2013 Traditional IRA or Roth IRA contribution yet?  If not, you should go ahead and contribute now.  This way you get the entire year for your dollars to grow.

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The post New 401K and IRA Contribution Limits for 2013 first appeared on Stalwart Financial Planning.