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Yahoo
12-04-2025
- Business
- Yahoo
Tax Day Countdown: 4 Reasons Retirees Should Use Accountants for Their Taxes in 2025
There is no shortage of tax filing software available for a pretty decent price (at least when compared to the price of hiring an accountant, for an average of $37 per hour, depending on location). Though this software generally gets the job done, it's likely to do so in a bare minimum way — and costly errors can occur. Discover More: Read Next: Everyone filing their taxes should consider enlisting the help of a living, breathing certified public accountant (CPA), but retirees should be even more keen on getting human-expert help. Why? Financial experts discussed the four reasons retirees should use accountants in 2025. Tax laws are always changing, and retirees need to stay in the loop. If you don't understand these laws, you could accidentally break one. 'Retirees might spend the extra money on a CPA to ensure they fully understand the tax laws around withdrawing from retirement accounts and the potential implications,' said Joe DiSanto, a financial advisor, fractional chief financial officer (CFO) and founder of Play Louder. 'This includes managing Social Security in combination with other withdrawals, understanding combined income limits, tax brackets and optimizing withdrawals from retirement accounts or taxable brokerage accounts for living expenses.' Find Out: Accountants can help retirees stay safe from bad actors looking to scam you via your tax filings. 'CPAs have access to technology-driven solutions that integrate directly with the IRS to monitor a retiree's account activity in real time,' said Kevin Knull, certified financial planner (CFP) and president at TaxStatus. 'With this active monitoring, the advisor can promptly identify suspicious behavior and address potential threats before they escalate into serious issues.' Mistakes are never made on purpose (that would defy the definition of 'mistake'), but the IRS doesn't care. It'll penalize you for an error, however innocent it is. An accountant has the intellect and know-how to help you avoid messing up important information. 'CPAs play a crucial role in helping retirees avoid costly mistakes in filing taxes, and in finding additional financial and tax planning opportunities,' Knull said. 'CPAs are equipped to avoid errors in tax planning that can lead to unexpected tax liabilities, penalties and audit risks. 'Examples of tax planning mistakes from a lack of data include: missed tax deductions and credits; overlooking unreported income; failure to adjust for tax liabilities on past earnings; incorrect Roth conversion recommendations; non-compliance with IRS reporting requirements and delayed filing deadlines due to missing information.' Think of hiring an accountant as an investment if only because they can help you lower your tax liability and claim money-saving deductions. 'Accountants play a critical role in ensuring retirees take full advantage of all tax deductions, credits and strategies to minimize taxable income,' said Melissa Murphy Pavone, founder at Mindful Financial Partners. We've highlighted the four reasons retirees should use accountants, but what if money is really tight? If that's the case, you might be able to safely skip this expense. Emphasis on the word 'might.' It depends on how complicated your finances are — and how much money you're reeling in. 'The complexity of a retiree's financial situation often determines whether they need a CPA,' DiSanto said. 'If someone's pretax retirement income is in the range of $4,000 to $5,000 per month, their tax liability might be minimal, and their situation might not be overly complicated. 'However, for retirees with higher income — say $100,000, $200,000 or $300,000 per year from sources like IRAs, 401(k)s, Roth accounts, life insurance, Social Security or taxable brokerage accounts — it might make sense to seek professional advice,' DiSanto said. 'A CPA can help navigate capital gains, dividends and other considerations to maximize efficiency.' If you do go the route of hiring a CPA, it's crucial to verify their credentials before commencing work. 'If you're going to pay someone, I'd recommend at least an enrolled agent who can represent you in case of an audit,' DiSanto said. More From GOBankingRates 5 Types of Vehicles Retirees Should Stay Away From Buying 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth 4 Things You Should Do if You Want To Retire Early 4 Affordable Car Brands You Won't Regret Buying in 2025 This article originally appeared on Tax Day Countdown: 4 Reasons Retirees Should Use Accountants for Their Taxes in 2025 Sign in to access your portfolio
Yahoo
08-02-2025
- Business
- Yahoo
6 Benefits To Filing Taxes Early for Retirees
Filing taxes isn't most people's idea of fun, but it's usually better to file early. After all, filing late can lead to some hefty penalties. The failure-to-file penalty is 5% of the taxes owed per month the payment is late (25% maximum). The failure-to-pay penalty is up to 25% of the unpaid taxes. Read More: Find Out: 3 Sneaky Things You Didn't Realize Your Tax Software Was Doing — And How to Stop Them This Year Even retirees should still file a tax return since many types of income are taxable at the federal — and in some cases — state level. And while it's possible to request an extension, as the IRS predicts 19 million taxpayers will do this year, it's generally best to get it out of the way. If you need further convincing, here are the top benefits of filing taxes early as a retiree. Anyone can be the target of fraud or identity theft, with many bad actors specifically going after retirees. Unfortunately, this may become even more prevalent of an issue going forward due in no small part to the National Public Data breach that occurred in 2024. 'In the summer of 2024, the National Public Data (NPD) breach exposed 272 million taxpayer identification numbers (TINs) and 2.9 billion records, including Social Security numbers. It was one of the largest data breaches in history,' said Kevin Knull, CFP and president at TaxStatus. Discover Next: 'One of the most severe consequences of identity theft in the aftermath of the NPD breach is the increased probability of fraudulent tax returns,' Knull continued. 'Criminals can use stolen TINs to file fake and fraudulent returns, often claiming large refunds long before the legitimate taxpayer files and is aware of an issue.' Filing early can help protect you in the face of tax-related fraud and identity theft. 'With this level of threat, the earlier a legitimate return is filed, the less opportunity there is for criminals to submit a fraudulent one in its place,' said Knull. 'It has never been more vital for taxpayers to file taxes as early as possible this year.' Waiting to file also means having to deal with plenty of people with the same idea. If you want to avoid the tax rush, and the headache that often entails, file early. 'One of the things I would say about filing taxes earlier is avoiding the madness of the tax rush,' said John Adams, CPA and fractional CFO expert at Bridgewater Tax and Financial Consulting. 'It is easier for a paid preparer to focus on your taxes earlier in the tax season rather than the rush.' Simply put, filing early gives you more time to figure out what might be missing from your tax return. 'Filing early gives you more time to identify and collect any missing information needed to file your return,' said Mark Luscombe, principal analyst for Wolters Kluwer's Tax and Accounting Division North America. It also gives you the chance to figure out how you're going to pay the taxes you owe, if any. 'Preparing your tax return early gives you more time to calculate the taxes that you owe and to make sure you have the funds available to pay any remaining tax due with the tax return,' said Luscombe. Whether you're living on a fixed income as a retiree, or you have a complicated portfolio, having more time is rarely a bad thing. According to the IRS, the average refund amount is $3,138. But setting the amount itself aside, filing early could mean getting that refund sooner than expected. For retirees who rely on this refund as a part of their regular income, this can be huge. 'If you file your taxes earlier, you are likely to get your refund earlier,' said Jay Zigmont, PhD, CFP and founder of Childfree Wealth. 'Refunds are generally processed in the order received. As we get closer to April 15th, there ends up being a backlog, and refund times tend to lengthen.' Handling your financials in retirement can be complicated. Once you reach a certain age (typically 73 years old), you must also start taking the required minimum distributions from your accounts. Accounts subject to RMDs include traditional IRAs, SIMPLE IRAs, and SEP accounts. 'If you are in the first year of having to make a Required Minimum Distribution, [filing early] will give you more time to plan which accounts to take the money out of and when,' said Adams. When you retire, the last thing you need is more stress of hassle. Filing your taxes early gets them off your plate so you can focus on other things that matter to you. 'Many people, including myself, file their taxes early just to get them out of the way,' said Zigmont. 'No one likes doing their taxes, so why wait and have to worry about it for a longer time?' More From GOBankingRates 4 Low-Risk Ways To Build Your Savings in 2025 3 Things You Must Do When Your Savings Reach $50,000 This article originally appeared on 6 Benefits To Filing Taxes Early for Retirees Sign in to access your portfolio
Yahoo
08-02-2025
- Business
- Yahoo
6 Benefits To Filing Taxes Early for Retirees
Filing taxes isn't most people's idea of fun, but it's usually better to file early. After all, filing late can lead to some hefty penalties. The failure-to-file penalty is 5% of the taxes owed per month the payment is late (25% maximum). The failure-to-pay penalty is up to 25% of the unpaid taxes. Read More: Find Out: 3 Sneaky Things You Didn't Realize Your Tax Software Was Doing — And How to Stop Them This Year Even retirees should still file a tax return since many types of income are taxable at the federal — and in some cases — state level. And while it's possible to request an extension, as the IRS predicts 19 million taxpayers will do this year, it's generally best to get it out of the way. If you need further convincing, here are the top benefits of filing taxes early as a retiree. Anyone can be the target of fraud or identity theft, with many bad actors specifically going after retirees. Unfortunately, this may become even more prevalent of an issue going forward due in no small part to the National Public Data breach that occurred in 2024. 'In the summer of 2024, the National Public Data (NPD) breach exposed 272 million taxpayer identification numbers (TINs) and 2.9 billion records, including Social Security numbers. It was one of the largest data breaches in history,' said Kevin Knull, CFP and president at TaxStatus. Discover Next: 'One of the most severe consequences of identity theft in the aftermath of the NPD breach is the increased probability of fraudulent tax returns,' Knull continued. 'Criminals can use stolen TINs to file fake and fraudulent returns, often claiming large refunds long before the legitimate taxpayer files and is aware of an issue.' Filing early can help protect you in the face of tax-related fraud and identity theft. 'With this level of threat, the earlier a legitimate return is filed, the less opportunity there is for criminals to submit a fraudulent one in its place,' said Knull. 'It has never been more vital for taxpayers to file taxes as early as possible this year.' Waiting to file also means having to deal with plenty of people with the same idea. If you want to avoid the tax rush, and the headache that often entails, file early. 'One of the things I would say about filing taxes earlier is avoiding the madness of the tax rush,' said John Adams, CPA and fractional CFO expert at Bridgewater Tax and Financial Consulting. 'It is easier for a paid preparer to focus on your taxes earlier in the tax season rather than the rush.' Simply put, filing early gives you more time to figure out what might be missing from your tax return. 'Filing early gives you more time to identify and collect any missing information needed to file your return,' said Mark Luscombe, principal analyst for Wolters Kluwer's Tax and Accounting Division North America. It also gives you the chance to figure out how you're going to pay the taxes you owe, if any. 'Preparing your tax return early gives you more time to calculate the taxes that you owe and to make sure you have the funds available to pay any remaining tax due with the tax return,' said Luscombe. Whether you're living on a fixed income as a retiree, or you have a complicated portfolio, having more time is rarely a bad thing. According to the IRS, the average refund amount is $3,138. But setting the amount itself aside, filing early could mean getting that refund sooner than expected. For retirees who rely on this refund as a part of their regular income, this can be huge. 'If you file your taxes earlier, you are likely to get your refund earlier,' said Jay Zigmont, PhD, CFP and founder of Childfree Wealth. 'Refunds are generally processed in the order received. As we get closer to April 15th, there ends up being a backlog, and refund times tend to lengthen.' Handling your financials in retirement can be complicated. Once you reach a certain age (typically 73 years old), you must also start taking the required minimum distributions from your accounts. Accounts subject to RMDs include traditional IRAs, SIMPLE IRAs, and SEP accounts. 'If you are in the first year of having to make a Required Minimum Distribution, [filing early] will give you more time to plan which accounts to take the money out of and when,' said Adams. When you retire, the last thing you need is more stress of hassle. Filing your taxes early gets them off your plate so you can focus on other things that matter to you. 'Many people, including myself, file their taxes early just to get them out of the way,' said Zigmont. 'No one likes doing their taxes, so why wait and have to worry about it for a longer time?' More From GOBankingRates 4 Low-Risk Ways To Build Your Savings in 2025 3 Things You Must Do When Your Savings Reach $50,000 This article originally appeared on 6 Benefits To Filing Taxes Early for Retirees
