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How to handle tax filings for 401K, retirement plan

6 months 4 days 22 hours ago Monday, April 17 2017 Apr 17, 2017 April 17, 2017 4:05 PM April 17, 2017 in News
Source: ABC
By: WBRZ staff

NEW YORK – Individuals that are 52 to 70 years old are either planning for retirement, beginning retirement or already into retirement and with each of those options there are tax incentives to consider.

"You can't just make a blanket assumption that just because you're retired you don't have to pay taxes anymore," Katherine Pickering, executive director of The Tax Institute at H&R Block, told ABC News.

If individuals are retired and their income is only social security, their income may not be taxable. Some retirees may not need to file, however if they receive income from other sources, it is likely they will have to pay up.

"Your social security benefits are taxable depending on the other income. If you're drawing other benefits, if you've got any kind of a supplemental income, that can all factor into that equation," Pickering said.

Those who are working for a business, their employer will withdraw taxes from their paycheck, however if they are self-employed, they are responsible for the taxes on that income. For those who have a retirement plan, individuals may not want to take money out of their retirement account too early.

"You don't want to take money out of your retirement account before age 59 1/2 or you could be subject to a 10 percent early-withdrawal penalty. And on the other end of the spectrum, you need to start withdrawing money by age 70 and that's what they call the "required minimum distribution in order to avoid penalties," Pickering said.

The IRS has a guide on how to file here.

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