Tax season is here, and for many of our clients, as you grow professionally and through your financial years, you come to discover more and more things finding their way onto your tax documents that you have to pay for. One of the most expensive things that you will depend on later in life is your retirement fund. Are you prepared to retire and are you aware of what you may or may not have to pay taxes on once you do?
February is here, and we are one day closer into tax season here in Goose Creek. We are here to provide the best tax preparation services to all of our current and new clients, so please don't hesitate to contact us this tax season! We are in full swing, and are prepared for what is going to be a very busy but very exciting tax season! With that being said, we are here to offer our clients at many stages of their lives help with their taxes. For those filing for the first time, for those filing for the first time as a married couple, and those filing for the first time after retiring. Just as you change through the stages of your life, how you pay your taxes will also change along with you.
Planning for your retirement is one of the most important things you can start doing once you start working in the professional world. You'll be paying for your retirement your whole professional career, and it will most likely be one of the most expensive things you'll ever pay for. There are no loans, no short cuts, so you will have to save and work for it. As overwhelming and difficult as this can be at times, the sooner you can start, the better your years of retirement will be. In honor of that, we will be dedicating this two-part blog to the pros and cons of having a 401(k) versus a Pension, and what that will mean come tax season once you are thinking of retiring and once you do retire!
The days of working for a company for 40 plus years and retiring with an amazing pension, health benefits, and security are becoming things of the past. Today, the 401(k) is dominating the world of the retirement plan. A 401(k) is a plan that was specifically designed to help you save for retirement and was created almost by accident! The 401(k) that we know today started its journey in 1978 with the creation of the Revenue Act passed by Congress that year. This Act was added to the Internal Revenue Code, Section 401(k), and it allowed employees to avoid paying taxes on deferred compensation. in 1980, a gentleman by the name of Ted Benna, benefits consultant of the Johnson Companies, was trying to come up with a way to have a more tax-friendly option for companies to provide retirement programs based on this new 401(k) idea. He came up with the incredible idea that allowed employees to save pre-taxed money in a retirement plan that the employer would then match and put back into the plan as well. This was the birth of the modern-day 401(K) plan, and The Johnson Companies were one of the first to provide these new benefits to their employees.
In the very beginning, the original section of the 401(K) in the Internal Revenue Code, did not allow stand-alone accounts to be created and to be funded by salary reductions. Mr. Benna pushed the IRS to change this idea, and they followed through. Those employees who now decided to partake in a 401(k) could now use their deferred income to make investments and not be taxed on any gains. By 1982, 401(k)s were being offered by thousands of companies, and they are commonplace for most companies today.
There are many benefits 401(k) programs give to business owners and employers, and many of these benefits are why pensions are becoming an endangered species.
The benefits a 401(k) can offer to the employee are also very positive.
Right away in just these two short lists (they could be much longer, this is just an overview), you can see how a 401(k) can be such a relief on your taxes now, and it won't be an issue on your taxes or even something you have to worry about until you start pulling money out of it. But even though there are some wonderful benefits to a 401(k) there are still some cons.
Don't be overwhelmed with these cons. When deciding on your future, especially your financial future that could affect your taxes, you need to be aware of both sides of the coin. It is good to remember that what you pay into your 401(k) can help reduce the liability rate on your taxes every year and can help with tax withholding during every one of your pay periods.
You have a lot on your plate right now when it comes to tax season, so for those who aren't taking money out of their 401(k) this year, it's one less thing you have to worry about when filing. For those who are just starting to use their 401(k) plan as retirement or in a situation based on need, this tax season might be a little different for you. But don't worry, we are here to help. We hope this information has enlightened you a little more on 401(k) plans, and one of the many options available to you for retirement. In our next blog, we will be exploring pension's and what kind of taxes you may or may not be facing with those. Until then, we are Hood's Tax and Accounting Service, here to help you with all of your tax needs in Goose Creek, SC!
The new year brings many new and exciting things, it is also the start of tax season. There have been many changes to business and federal taxes, but with all of these changes, personal taxes will also be seeing many changes for the 2019 and 2020 tax season. Are you familiar and up to date on these changes? If not, you've come to the right place!
2020 is officially here! Some people might be spending a little extra time at the gym and meal prepping, while all of us at Hood's are spending more time getting our clients and future client's in the Goose Creek area ready for April 15th with no surprises or stress. Every year, something changes with tax law. These changes might be small and easy to deal with, while other years prove to be rather difficult. It takes time and dedication to stay up to date on these changes, so why not take advantage of our services to make sure your taxes are prepared efficiently, on time, and with no worry about being charged any late fees?
While you are starting to gather your tax documents, there is quite a list of things you will need to keep in mind. Please take the time to read through every one of these changes before you start filling out any paperwork for 2019 and 2020. We talked a lot about changes for forms and filing in our last blog. In this blog, we will be discussing some of the benefits that will hopefully make paying your taxes a little easier.
Use these new changes in your personal taxes to prepare for this tax season and the next. They may not benefit or affect you this year, but they could have a significant effect on you in the years to come and for the better. Are you planning on retiring next year? How about getting married? Are you starting a new job that offers you a 401(k) for the very first time? Are you dealing with an HSA account for the first time or wanting to expand one? The changes we have mentioned above will help you decide and understand the best routs to take with these important decisions.
Please don't stress when it comes to taxes. Our professionals can help you with all of these changes, and answer any questions you might have. Please take into account that this list is just an overview of some of the changes happening, it doesn't cover all of the changes that could be affecting your personal taxes in the years to come. Come visit us and depend on Hood's to get everything taken care of, and to understand what changes are heading your way for this tax season and the many seasons to follow!
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