2011 Taxes to 2024 Taxes

Tag: Pension

Should You Take Care of Your Own Taxes?
One of the major downsides of being self-employed is the dreaded tax return and the question of whether you should do it yourself or pay an accountant to do them for you.
Your initial thoughts may be to file your own taxes to save paying someone to do them for you, but you should never underestimate the time and effort it takes to complete your tax returns and the consequences if you get it wrong.
To make matters worse the goalposts sometimes move and the rules can change depending on new tax laws or even if there is a change in your personal circumstances.
Who should complete and file a tax return?
Most taxpayers that are in full time employment do not have to complete a tax return as this is taken care of as part of the Pay As You Earn (PAYE) system on your wages or occupational pension.
This means that you will not be issued with a tax return.
However, you will be issued with a tax return if you are
Self employed
- A company director (though not if for a not-for-profit company)
- Have income from rent or properties (there is a lower amount that can fall under PAYE)
- Have another income that is not taxed by PAYE.
If you are unsure whether or not you fall into any of these categories then you should contact the revenue service at www.hmrc.gov.uk.
Tax return deadlines and fines
The filing dates for tax returns are different depending upon whether you return them using paper forms or online.
The deadline for the paper tax returns is October 31 of the following year.
The deadline for online tax returns is January 31 of the following year.
And the bad news is, if you miss these deadlines then there are some strict penalties:
- £100 penalty – tax return is one day late
- £10 per day, up to maximum of £900 – three months late
- The greater of 5% of the tax due or £300 – six months late
- The greater of a further 5% of the tax due or £300 – 12 months late
And the worst news is that you could be liable for these fines if you don’t owe any tax or even if you are owed money – so make sure you file your tax returns!
Keeping records
The law dictates that you must keep all of the records necessary to fill in and correctly complete a tax return. Incomplete returns are subject to penalty fees and interest charges. To find out about what records you should keep visit www.direct.gov.uk
Estimates and errors
If you are waiting for information you need to fill in your tax return then you may use provisional figures or estimates so that your return isn’t filed late. Use the ‘any other information’ box or white space on an online return to draw attentions to this.
If you make an error on your tax return then this can be put right by calling HMRC on 0845 60 55 999.
Should you take care of your own taxes?
If you fall into one of the groups that need to fill in a tax return then you need to consider whether you can trust yourself to get it right and if it is worth the time and potential stress. If not, then it may be best to employ an accountant to do it for you.
Rob E is an avid financial blogger and freelance writer for www.click4personalfinance.com and loves to share his knowledge on personal financial.
Related articles
- Know About Tax Adjustments Now And Save More (2012taxes.org)
- Which “Perks” need to be Declared on your Tax Return (2012tax.org)
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March 29, 2012
Rolling Over Your IRA
You would be hard pressed to find any financial planner that does not recommend saving for retirement to their clients. There are, after all, numerous investment options to help an individual accumulate wealth over time. To make it even easier for people to save money, many companies now offer employee sponsored retirement plans such as the 401(k), 403(b), and 457.
While these plans are certainly a great investment option when an individual continues to be employed by the sponsoring company, what happens to their account when they change jobs or retire? When an employee elects to change jobs, or retire, it is crucial that they fully under the various IRA rollover rules.
IRA Rollover Options
When a change in employment status occurs, the employee has three basic rollover options. Perhaps the most common option is to simply cash out the account. When an employee elects to take a cash distribution, the trustee writes a check for the balance of the account. By law, the employer is required to withhold 20% of the balance as a prepayment of the estimated taxes that will be due at year end. Furthermore, unless the employee is at least age 59½, he or she will also be subject to an additional 10% withdrawal penalty.
A second IRA rollover option is known as an indirect rollover. This occurs when the employee receives a cash distribution from their account and elects to deposit the fund into a qualified Roth IRA (make sure you fully understand the various Roth IRA qualifications), Traditional IRA, 401k, 403b, or 457 plan within 60 days of the check being issued. In this scenario, the employer is still required to withhold 20% of the balance. To complicate matters even more, the employee is required to deposit the full balance of the account, including the 20% that was withheld, in order to avoid any additional taxes and penalties.
A final option is known as a direct rollover. This option is perhaps the best alternative when the employee has a long-term perspective. In a nutshell, the employee authorizes the employer to transfer the balance of their account directly to the new custodian or trustee. In this scenario, the employer is not required to withhold anything and no taxes or penalties are assessed to the employee.
If you need to rollover your retirement account due to a change in employment status, you should seek the guidance of a qualified investment professional. These highly trained individuals will be able to determine the best type of account for your specific financial circumstances.
Related articles
- Roth IRA Rules and Penalties (2011taxes.org)
- Pros and Cons of 401k rollover to IRA (2011tax.org)
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June 7, 2011
Roth IRA Rules and Penalties
In the world of retirement plans, there are many types of financial investments available for all classes of workers. Most people are quite satisfied with the 401k plan which comes customarily with their employment. People who switch employment before they can retire may wish to make a rollover from their 401k account to a Roth IRA. Because of the complexities involved in making the rollover, there are actually quite a number of financial institutions that offer to handle the legal red tape involved with rolling over your assets from the 401k to your new Roth IRA.
In any case, there are generally two ways by which you can commence a Roth individual retirement account according to existing laws. The first way is to make a self-managed Roth IRA by simply declaring some of your assets or investments under the Roth IRA system. This is rather risky because if you do not know what you are doing, your assets could far outweigh your liabilities quite fast. This is why it is recommended that people who go for self-managed Roth IRAs only do so if they are quite certain that they know the risks they are taking. In order to have some form of assurance, you should get a financial consultant or adviser to manage your account in case you are really dead-set on taking out a self-managed Roth IRA.
All Roth IRA account holders, however, should be aware of the Roth IRA Withdrawal Penalty which is set by law at 10%. The individual retirement account may also be liable for taxes which are separate from the 10% penalty if early, unqualified withdrawals are made. In order to make qualified withdrawals under the Roth IRA system, it is important to comply with the 5-year rule as well as the age requirement of 59 and a half years of age.
Related articles
- Different Roth IRA Distribution Rules (2009taxes.org)
- The Best IRA CD Rates for Your Roth IRA Account (2008taxes.org)
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June 3, 2011
Start Saving Young For Your Roth IRA
When you begin to save for retirement will have an effect on which retirement plan you choose. Some retirement plans allow for you to put into the fund as much money as you want and this would be best for someone beginning to save later in life. While other funds have limits on how much money you can put into the fund each year and this kind of fund would be best for individuals beginning to save at a younger age.
If you are beginning to save at a younger age then a Individual Retirement Account known as a Roth IRA could work for you. The reason saving at a younger age is mentioned is because there are specific contribution guidelines that must be followed in order to have a Roth IRA, thus if you are trying to put away a lot of money then a Roth will not work. Listed below in this article are a few pros and cons to owning a Roth IRA.
To calculate your Roth IRA value a Roth IRA calculator can be found on the Internet if you are interested in knowing. A Roth IRA is a non tax deferred retirement plan, unlike the Traditional IRA which allows you to not pay taxes on the money in the account until later when it is taken out. The one disadvantage to the money being not tax deferred is also that by contributing to a Roth your adjusted gross income is not reduced. If you are close to a lower tax bracket then having your AGI reduced is a good thing because then you qualify for tax breaks and deductions.
A Roth IRA allows for the normal man to put back money for retirement and if he starts early enough there should be no worries. For someone starting to save later on in life a Roth may not be the best plan due to its rules regarding the contribution limits. Either way if you happen to be within the income limits you can contribute to a Roth and save some amount of money for your retirement.
Related articles
- Traditional IRA or A Roth IRA You Decide (2011tax.org)
- IRA: Traditional IRA and Roth IRA (2010tax.org)
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May 2, 2011
Retirement Plan for You Small Business? Choose a SEP IRA
When running your small business or company, managing your resources and maximizing its full potential is vital to its success. All expenses must be cost effective, and employees should get the best benefits at lower costs. In choosing a retirement plan for your company, a SEP IRA should fit the bill perfectly.
Simplified Employee Pension
What is a SEP IRA? A SEP is a retirement plan that gives employers a simple way to give contributions to their employees IRA accounts. In essence, the SEP is a profit-sharing plan, where employees can receive more contributions to their accounts if business is doing well.
Employee qualifications?
In order for an employee to be eligible for a SEP plan, he or she should be at least 21 years of age, has worked for the employer for 3 of the last 5 years and has a minimum annual salary of $500. The employee will setup the IRA account which will fall under the SEP (SEP IRA).
SEP Contributions
In a SEP, employers make the contributions. These contributions are discretionary; an employer can choose to contribute or not, and is free to give the amount he or she prefers, provided that it is within the plan’s contribution limits of $49,000 or 25% of the employee’s annual salary, whichever is less.
Distribution
In a SEP IRA, required withdrawals start at 70 ½. Compared to other plans where withdrawals start at 59 ½, the SEP IRA allows the invested money more time to grow. Any withdrawal made before 59 ½ is subject to a 10% early withdrawal penalty plus the amount withdrawn will be taxed as ordinary income.
Because of the SEP IRA’s flexibility, not only do employees reap the benefits of bigger possible contributions from the employer, employers also enjoy the convenience of being able to choose when to make their contributions, which can potentially save a business during times of low profits.
Related articles
- SEP IRA: the Flexible Retirement Plan (2010tax.org)
- Does a SEP IRA Fit You? (2010taxes.org)
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April 4, 2011
Wills in Texas – planning for inheritance tax
A will is a legal document outlining who will receive your accumulated wealth and assets upon your death. Wills in Texas help you distribute your wealth as you desire among those you love. After your death, if you do not plan your estate properly, your loved ones could end up having to pay hundreds of thousands of dollars in taxes upon your death.
Planning for inheritance taxes is one last thing you can do for your loved ones to help them keep as much of your property as possible. There are two kinds of properties. Real property is land, improvements on that land, gas, oil, and mineral rights. All other property is called personal property. It helps to know what is taxable and what isnt so you can leave your relatives with as much as possible without having to pay a lot in taxes.
If the sum of your personal and real property is above the Inheritance threshold of your state, your beneficiaries will be taxed a good percentage of the remainder. Inheritance tax is a controversial law. Having to pay taxes on already taxed income seems unfair. However, it also seems unfair that wealth will be perpetuated within a family line. Inheritance tax helps to redistribute wealth to the government and the common man.
You can limit the amount of money you have to pay in taxes by opening a living trust, giving money to charitable projects, and investing your money into your business or agriculture. Agricultural land may be left the farmer sun of a farmer and be up to 90 tax exempt. Property invested in the family business may also be exempt from taxes up to 90. Planning your wealth and passing it on to your relatives in the most orderly fashion takes time and professional assistance. Texas wills advisors can help you in your planning for inheritance taxes.
Related articles
- Inheritance tax planning (2009tax.org)
- Inheritance Tax Planning Helps You Get the Largest Financial Value (2011tax.org)
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March 29, 2011