Grand Rounds: The Tax Man Cometh
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Welcome to this session of grand rounds, a collection of posts I have discovered in the blogosphere and have found of interest and hope you do too.
You might be still reeling from paying your taxes at yesterday’s deadline and do not want to deal with taxes for awhile.
But there is no rest for the weary.
Now is the time to strategize about reducing next years tax bill.
This offering of Grand Rounds looks at articles from around the web that deal with everyone’s least favorite thing, taxes.
A very common saying among the financial blogosphere is, “It’s not what you earn. It’s what you keep!”
The premise behind this mantra is that taxes can have a significant impact on your financial life and it behooves us to pay attention so that we can minimize the damage it does to our bottom line.
There is a window of opportunity that occurs from the moment we retire and stop having W2 income and the moment we are forced to take Required Minimum Distributions (RMDs) from our tax deferred accounts.
RMDs can be like a tax time bomb waiting to happen, pushing you into higher tax brackets and incurring other penalties such as having your social security benefits taxed on a federal level.
A nice side effect of those who retire early is that this window of opportunity is extended.
FI Physician gives us a great breakdown of how to take advantage in, “The Tax Planning Window.”
It is better to give than to receive.
But be careful, you do not want to incur the wrath of the IRS because of it.
Much like tax code and the IRS in general, the Gift Tax can be very confusing.
You may wonder if the giver or the receiver is responsible for the tax or if there is even a tax for certain gifts at all.
Fortunately Full Time Finance deciphers the tax code for you and presents it in a far more digestible form in, “The Gift Tax Explained.”
It is tough to lose a loved one, especially if it is a spouse you have been linked to for decades.
Friends and family typically will band together and offer support and sympathy during this time, which is quite understandable.
But do you know that there is always one person who will not offer condolences during this tumultuous time in your life?
Yep, good ole Uncle Sam.
Adding to the emotional hardship you are facing, Uncle Sam can pile on financial hardship as well by setting off a “tax bomb.”
FI Physician further explains in, “Widow’s Tax And The Widow’s Penalty.”
A lot of people celebrate that they have or will receive a large “tax refund” from the government.
However this really is no cause for celebration.
The government merely is returning the extra money you gave as an interest free loan to Uncle Sam.
I for one am happy I owe the IRS each year (which technically makes me a liar when I tell people I am debt free).
Cory Fawcett, MD likewise feels that Uncle Sam can be bested in his post, “Beating The Tax Man At His Own Game.”
If you ever have trouble sleeping, I suggest picking up the current year’s tax code and try to decipher it.
It seems that the writers of our tax laws purposely are trying obfuscate us.
What is even sadder is that the IRS already possesses all the data/forms you end up submitting and could just as easily have given you your final tax bill.
But instead they let us wallow in our misery for those who are brave enough to prepare their own taxes.
But there are some concepts that are important to understand that may help you to figure out the best strategy to lower your tax bill.
FI Physician attacks one of those concepts in, “Long-Term Capital Gains Tax Stack On Top Of Ordinary Income.”
Hope you enjoyed the reading material.
Have a great rest of the week.
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