IRS back tax prevention tips for senior citizens

1. Welcome
For
IRS Back Tax Prevention Tips For Senior Citizens
From
www.onlinetaxinformation.com

2. Make Work Pay Credit
While the "making work pay" credit proposes
it will cut taxes for 95% of families, there is an
interesting loophole for senior citizens, which
is causing some to end up with unforeseen
back tax liabilities. According to the law, non-
working senior citizens-in addition to retired
railroad workers and disabled veterans-cannot
claim the full credit.
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3. The problem is that the credit automatically
adds 6.25% of earned income to taxpayer's
paychecks. Therefore, if you are a senior citizen
who does not qualify for the full credit, then
you will need to make sure to change your
withholdings to prevent owing a tax debt at
the end of the year.
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4. Next time you receive a check from Social
Security, be sure to check the benefit
statement to see if you are having any taxes
withheld. If you did not have any taxes
withheld on social security and you have other
sources of income, you may be creating for
yourself an under withholding problem come
next tax season.
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5. Taxes on Social Security income
The IRS has specific guidelines to follow when
deciding whether you social security payments
are taxable. Accidentally overpaying is okay,
but if you make the mistake not to pay taxes
on your social security benefits, then it could
lead to IRS underpayment fines. These
additional penalties, on top of the already
owed taxes, can be difficult for struggling
seniors to pay come tax time.
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6. To ensure that you are not creating an under
withholding problem, you should seek the
advice of a tax professional. The tax
professional can review your financial situation
to determine whether you need to up your
withholding to cover your expected tax
liability.
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7. Pension
When receiving pensions, you may have a hard
time deciding how much to withhold, or if you
want or need to withhold anything at all. Whether
you should have taxes withheld from your pension
payments depends on your filing status, number of
dependents, personal exemptions, additional
sources of income, and the amount of retirement
payments you receive.
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8. If you do need to pay taxes, you need to figure
how much to withhold. Withholding too much
is not a good idea as you may end up giving the
IRS an interest free loan. However, not
withholding enough can result in hard-to-
estimate taxes at the end of the year, which
could lead to back taxes, penalties, and
interest if you are not careful.
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9. Be Aware of Deductions & Credits
When preparing your income tax return, it is
essential that you take advantage all eligible
deductions and credits since they will help to lower
your total tax liability. Remember, the IRS has set
up a number of deductions and credits directly
targeting senior citizen taxpayers. To learn more
about tax tips for seniors, check out this article on
the RDTC.com blog.
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10. Early Distributions
If you are under 60 years old and need to take an
early distribution from a retirement account, then
be forewarned that you will likely have to pay an
additional 10% tax on the funds withdrawn.
However, the tax does not apply to funds from
Roth IRAs, and there are various other exceptions
to the tax. To learn more, check out the IRS' list of
the top ten facts about taking early distributions
from retirement plans.
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11. Accurate Tax Information
The best way to prevent unnecessary tax debts
before they occur is to have your returns accurately
prepared by a qualified professional. There are
several community service programs devoted to
helping senior citizens with tax preparation, and
the IRS has also set up a free tax-counseling
program to provide financial and tax planning
advice to seniors all year long.
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