A Few Tax Saving Strategies For the Retired

Several people spend a substantial amount of their time scouring the web and publications for the latest stock strategy, or the newest trend in the market that will earn them more money, and at a faster rate than their previous investment. In fact, too much time is spent on this undertaking and none is dedicated in trying to lessen tax dues. Sure, it's important to earn money, but you will simply have to work much harder if you're doing what it takes to keep the IRS from taking as much as they can. You will find this most useful during retirement, the time when you think that finally, you are done dealing with the IRS.

Social security benefits are perhaps the best example of this topic. Note that you have been paying your taxes into social security during your employment years. If at some point during your employment you did not handle your tax obligations correctly, problems related to your retirement benefits might pop up. Specifically, you might be taxed for receiving this benefit. Generally, 85% of your social security income amounting to a minimum of $34,000 per annum is taxable. Surely, this isn't an ideal situation for retirees who have previously believed that they are done dealing with the IRS.

You might want to convert your traditional IRA to a Roth IRA to save some money. Roth IRA will enable you to make withdrawals from the said account without having to pay taxes.  Yes, there are specific criteria that you should qualify for before getting a Roth IRA but if you meet those, it is definitely worth the try. On the other hand, you will now be required to pay taxes on the entire converted amount. Depending on your case, you might be obligated to pay large amount of taxes for this. Still, many people consider this as a better choice.

You might want to reduce your taxable income to lessen the incidence of this situation. This can be effectively done by selling off stocks that are in a taxable account and have also appreciated the least. With this, your capital gains will be significantly lessened and so will your taxable income. You'll also have better chances of qualifying for the 0% tax bracket if you were able to subside by living on principal. You just need to be careful with this so as to avoid probable IRS problems.

Another method is to simply spend your money relatively soon after you earn it. Basically, if your money market account or CDs are getting interest, you might want to spend those earnings within the same year. You will be required to pay taxes on that money whether or not you spend it, so do not forget that you have the choice of spending it. For instance, if you have a CD worth $100,000 and it earns 5%, why not simply utilize that extra $5,000 this year rather than using it towards an IRA distribution. If you put that in an IRA distribution, it will just be made part of your overall taxable income.

Retirees have a number of simple money saving tips and it is up to them to know as to how much one strategy will affect the quality of their lives. For sure, tips that are grounded on saving money from their tax spending are more likely to have a positive impact, especially during the retirement years.

Darrin T. Mish is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. He can be reached at his website at http://www.getIRShelp.com