Retirement

Share This

Whether you're saving for retirement or you're already retired, it's important to understand how retirement decisions affect your tax return.

Contributing to a qualified retirement plan, such as an Individual Retirement Arrangement (IRA) or a 401(k) plan, can lower your tax bill while you are still in your working years. In fact, saving money on this year's tax return can be a great reason to start or contribute to a retirement plan.

Saving for Retirement Through Employer Sponsored Plans

One of the easiest ways to get started saving for retirement, if your employer offers a 401(k) or similar plan, is to have a percentage of your wages or salary deducted from your pay. This method is easy for two reasons.

First, it's a lot easier to save money when it's a small amount, deducted regularly from every paycheck, and the money never lands in your checking account.

Second, the contribution amount lowers your taxable income, so you have less income tax withheld from your paycheck. Because you're having less withheld, your paycheck won't be reduced as much as you think.

Self-Employed SEP Plan or a SIMPLE IRA

401(k)s and similar plans are not the only way to save for retirement. If you are self-employed, you may want to set up a Self-Employed SEP plan or a SIMPLE IRA.

You may also qualify to open a deductible IRA - an account you open yourself at a brokerage or other institution. IRAs are also a good choice if you need to roll over funds from another account. For example, if you have a 401(k) account at an employer you no longer work for, you can roll over the balance directly into your own IRA account without paying a penalty.

Roth IRAs

Roth IRAs work on a different principle. You can't deduct contributions to a Roth IRA, but when you withdraw money from your Roth IRA at retirement, the entire withdrawal is tax free.

Another advantage of Roth IRAs is that you can generally withdraw your contributions (not interest or other earnings) if you need to, without penalty. This may make you feel more comfortable contributing if you're afraid you may need the money for an emergency.

Social Security Benefits

If you are an employee or are self-employed, you contribute to the Social Security system your entire working life. If you work after full retirement age, you may even pay Social Security tax at the same time you're taking Social Security benefits.

The decisions you make about when you start taking Social Security benefits and how you take them are very important. The longer you put off taking Social Security benefits (up to a point), the more you will receive in monthly benefits.

If you are or have been married, deciding how to take Social Security benefits becomes more complex. You may be able to claim Social Security benefits based on your current or former spouse.

In some cases, you may be better off claiming your own benefits, and then switching over to benefits based on a former spouse. If your former spouse has more than one spouse who can claim benefits based on his or her earnings, the benefits one spouse claims do not affect the benefits available for another spouse.

You can get answers to questions about your own Social Security benefits by creating an account on the Social Security website at ssa.gov.

Retirement Withdrawals and Taxes

When you start taking retirement distributions, the way they affect your taxes depends on the type of plan and other factors.

The general rule is that you pay tax before you contribute it to a retirement plan, you pay tax when you withdraw money from the plan, or some combination of the two.

If you take qualified distributions from a deductible traditional IRA, the distributions are taxable income. The same is true of distributions from deductible 401(k) plans and most other plans that you contributed to with pre-tax money.

If you take qualified distributions from a Roth IRA, you don't include the distributions in taxable income.

When you receive retirement benefits from a pension plan or other qualified plan to which you made after-tax contributions, you may pay tax on only part of the distributions. The Form 1099-R you receive from the financial institution may tell you how much of your distributions are taxable.


Back to My Tax Information

February 2015
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
 

Upcoming Tax Dates

February 2 Individuals who must make estimated tax payments
If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2014 by February 2. Filing your return and paying any tax due by February 2 prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by February 2, file and pay your tax by April 15.

February 2 All Employers
Give your employees their copies of Form W2 for 2014. If an employee agreed to receive Form W2 electronically, have it posted on a website and notify the employee of the posting.

February 2Payers of gambling winnings
If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W2G.

February 2 Nonpayroll taxes
File Form 945 to report income tax withheld for 2014 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit or pay any undeposited tax under the accuracy of deposit rules.

February 2 Social Security, Medicare, and withheld income tax
File Form 941 for the fourth quarter of 2014. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until February 10 to file the return.

February 2 Certain small employers
File Form 944 to report social security and Medicare taxes and withheld income tax for 2014. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more for 2014 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

February 2 Farm employers
File Form 943 to report social security and Medicare taxes and withheld income tax for 2014. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

February 2 Federal unemployment tax
File Form 940 for 2014. If your undeposited tax is $500 r less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

February 2All businesses
Give annual information statements to recipients of certain payments you made during 2014 - Details

February 2Form 720 taxes
File Form 720 for the fourth quarter of 2014.

February 2 Wagering tax
File Form 730 and pay the tax on wagers accepted during December 2014.

February 2Heavy highway vehicle use tax
File Form 2290 and pay the tax for vehicles first used in December 2014.

February 10Nonpayroll taxes
File Form 945 to report income tax withheld for 2014 on all nonpayroll items. This due date applies only if you deposited the tax for the year timely, properly, and in full.

February 10Social security, Medicare, and withheld income tax
File Form 941 for the fourth quarter of 2014. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.

February 10Certain small employers
File Form 944 to report social security and Medicare taxes and withheld income tax for 2014. This due date applies only if you deposited the tax for the year timely, properly, and in full.

February 10Farm employers
File Form 943 to report social security and Medicare taxes and withheld income tax for 2014. This due date applies only if you deposited the tax for the year timely, properly, and in full.

February 10Federal unemployment tax
File Form 940 for 2014. This due date applies only if you deposited the tax for the year timely, properly, and in full.

February 10Employees who work for tips
If you received $20 or more in tips during January, report them to your employer - Details

February 11Communications and air transportation taxes under the alternative method
Deposit the tax included in amounts billed or tickets sold during the first 15 days of January.

February 13Regular method taxes
Deposit the tax for the last 16 days of January.

February 17Everyone
Federal Holiday (Washington's Birthday) - Details

February 17Individuals
If you claimed exemption from income tax withholding last year on the Form W-4, you must file a new Form W-4 by this date to continue your exemption for another year - Details

February 17All businesses
Give annual information statements to recipients of certain payments you made during 2014 - Details

February 17Publication 509 (2015)
All payments reported on Form 1099S, Proceeds From Real Estate Transactions. Substitute payments reported in box 8 or gross proceeds paid to an attorney reported in box 14 of Form 1099MISC.

February 17Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in January.

February 17Nonpayroll withholding
If the monthly deposit rule applies, deposit the tax for payments in January.

February 18All employers
Begin withholding income tax from the pay of any employee who claimed exemption from withholding in 2014, but did not give you Form W4 to continue the exemption this year.

February 25Communications and air transportation taxes under the alternative method
Deposit the tax included in amounts billed or tickets sold during the last 16 days of January.

February 27Regular method taxes.
Deposit the tax for the first 15 days of February.

View More Tax Dates