There Are More Ways To Get In Trouble With the IRS Than You Think
If you think only shady business owners or tax evaders get in trouble with the IRS, you are wrong.
Senior citizens, especially those on fixed incomes, can end up in trouble with the IRS more often than you’d expect.
Retirement does not mean you get to stop paying taxes. Part-time work, investments, and even Social Security benefits can be included in taxable income.
2. Missing the Required Minimum Distribution
Failing to take your Required Minimum Distributions (RMDs) could result in a substantial penalty. After the age of 73, you are required to withdraw a minimum amount from your 401(k).
3. Withholding Too Small or Too Large An Amount
Retirees who withhold a small amount from their Social Security or pension may face higher tax penalties later on. You can choose to withhold 7%, 10%, 12%, or 22% of your monthly payments.
Retirees must manage their own tax payments, so if you underwithhold and pay less tax out of each Social Security check, you will be left with a larger tax bill on tax day. At the same time, over-withholding or paying more tax than necessary results in a tax refund.
However, the goal is to cover your tax liability and avoid a penalty while maintaining proper budgeting.
4. Falling for Scams
Fake IRS calls or phishing emails are on the rise, and thousands of seniors are tricked into giving away their personal information.
Keep a skeptical eye on unsolicited messages, especially those with a high sense of urgency, and always verify companies through a quick online search to ensure authenticity.
5. Failing to File Taxes
Some seniors believe they are exempt from filing taxes with the IRS because they are retired; however, this is not always the case. Social Security, pensions, and Roth IRAs are all part of IRS taxes.
Conclusion
If you are a senior and are concerned about where you stand with the IRS, it’s time to consult a tax team today and let them review your specific tax situation. You could be leaving money on the table or failing to meet age requirements. It’s time to address those issues.
Schedule a free consultation