Retirement,and,Taxes,Once,you, business, insurance Retirement and Taxes
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Once you reach retirement age your life will change. Youll no longer have to get up every morningto go to work. Youll be on a limitedincome and a tighter budget. Youll alsoprobably have to spend more money for medicine and health care. In additionto all of this, your tax situation will change. If youve just retired then youll have a lot of interesting things tolearn. First, youwill still have to report your regular income for the part of the year youwerent retired. This means your W2income and consequently withholdings will be less for the year that you retirein. This means that you should not counton your withholdings to pay your complete tax liability for that year. Second, youwill also have to figure out whether you will have to pay income taxes on thedistributions from your IRA now that youve reached the qualified distributionage. If you paid taxes on your IRA whenyou deposited the money into the account, you will not be assessed taxes on thedistribution, something to think about if youre planning for retirement. Next youllhave to take a look at where your income after retirement is coming from. If you get another job after you retire fromyour regular one, youll have to report that income as well. Deciding to get a new job after retirementcan be a tricky proposition, because it might affect your social security orgovernment pension. However, even ifyour new job pays you as an independent contractor, you will have to pay taxeson the income unless you make less than the reporting standard. Thereporting standard is how much income the IRS has determined an individualneeds to earn before they must file their income taxes. The IRS changes its standards each year forinflation, so you should always check every year to make sure whether you arerequired to file. However, ifall of your benefits are from social security, a government pension (likeTeachers Retirement), or Railroad Retirement benefits your benefits aregenerally not taxable. If they aretaxable, no more than 50% of your benefits will be taxable unless the totalamount of your benefits and any additional income is more than $34,000 (in2009) or $40,000 (MFJ), you lived apart from your spouse during the tax year,or you are a nonresident alien. In thosecases 85% of your total benefits may be taxable. Inaddition, the IRS allows the elderly or disabled to take a special credit ifthey are over 65, your income is within the prescribed limits (as determined bythe IRS), or have proof that you are completely and permanently disabled. If you qualify for this credit, your federalincome tax will be lowered by the amount you qualify for.
Retirement,and,Taxes,Once,you,