Dollars & Sense
Retirement planning and IRS audits
Retirement
Are you going to be ready for retirement when you reach that age? You can never start planning too early!
Put money in a retirement plan each year. Examples are IRA’s and 401K’s. Six or seven years before you think you may retire, you need to figure out how much money you will spend annually upon retirement. You must do a reality check to see if you are going to be able to attain that goal.
Also consider long term care insurance as the need for nursing home care can throw your retirement planning out the window. If you still have a mortgage, check into the possibility of a reverse mortgage, which can help ease your retirement burden.
Below are some spending categories you should include as part of your budget for retirement:
*Housing
Mortgage, Homeowner’s insurance, maintenance costs, property taxes and condo fees
*Utilities
Electric, oil and gas, phone, cable and Internet service, water and sewer
*Personal
Groceries, clothing, laundry and dry cleaning, health and beauty products
*Health care
Health, dental and vision insurance, Medicare premiums, Medicate supplemental premiums, long-term care insurance premiums
*Transportation
Auto loans or leases, registration fees, gas, insurance, maintenance
*Recreation.
Club memberships, travel, entertaining, dining out, movies, sports events
The following is an estate planning checklist that will give you and your family more comfort:
*Review your assets and debts
*Decide whom you want to inherit your assets
*Draft or update your will
*If you have dependent children, choose a guardian
*Get a durable power of attorney
*Consider a living trust
*Obtain medical power of attorney
*Discuss an estate plan with your heirs
*Write a letter of instruction
IRS Audits
The IRS has announced that they are going to increase the number of audits conducted each year. Two groups of taxpayers are going to feel the brunt of the increased audits. They are the self-employed and S-Corporations.
One major area of contention of all audits is proving that all the income has been included on the taxpayer’s tax return.
For the self-employed, the home office deduction can lead to an audit. Also, be concerned if your business shows losses year after year after year. Large expenses and low income will also catch the eye of the IRS. They are also interested in the mortgage interest deduction and real estate taxes.
If the S-corporation has a low officer salary, that is usually an indication to the IRS that you may be avoiding payroll taxes. The IRS states that an S-corporation must pay a reasonable salary to the officers for what you are doing.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at 800-697-5153.
“Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.