By Seomul Evans
Most of the retired individuals try to scour the web pages looking for latest stock strategies, hot market trends and newer ways to make money and getting the most out of their current investments. However, after paying tax all their life, they feel that they are not going to deal with the IRS issues anymore. But, little do they bother to know about how retirement Income is taxed, pension and Annuity Income taking full advantage of the itemized deductions or standard deduction, required Minimum Distributions, maximize tax-free income and personal exemptions. Did you know that 85% of their social security income is taxable (subject to minimum $34,000 per annum), and they are not yet out of the vicious circle of tax payment.
One of the good options in this regard is to convert the traditional IRA into a Roth IRA, though you must qualify to apply for a Roth IRA. This is again a tricky option because the entire converted amount becomes taxable, and you may end up paying higher tax on it. However, you get the flexibility to make non-taxable withdrawals from your Roth IRA account, so that you may bring down the net taxable amount as and when required.
On the other hand, you may also want to sell off stocks in your taxable account that appreciated too much. By adopting various strategies, you can end up in the 0% tax bracket, though you must careful enough to do this skilfully in order to avoid any kind of IRS problems.
Another great way is to spend all the extra money that your earn by other means. Even if you get any interest out of your money market account, you should spend it before it becomes an asset in the eyes of the IRS.
Remember, it is not just about earning more, but also minimizing your taxes. You may not have been able to avoid taxes to a good extent throughout your life, but now is your turn to save your precious money from being taxed up, and enjoy 100% of your earnings by declaring yourself within the 0% tax bracket.
It is noteworthy that all the planning must be done in advance so that you end up falling in the 0% tax bracket rather than having to pay taxes at the last moment. If you know what you are doing, there should not be any problems in minimizing your taxes.
In case, you are not sure how to deal with the tax issues and declare your net taxable income to be within the 0% tax bracket, then you may want to consult a tax preparer or tax authority that can help you in this regard. After all, it is worth paying $1000 to a CPA or tax attorney may be a smarter idea than paying off higher taxes to the IRS.
Keep your taxes low stop overpaying the IRS and start to save money on taxes so you can spend it on things you would enjoy the most.
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