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