Depending on your income and other factors, you many not need to file a tax return. However, in some cases you may want to file anyhow.
taxable compensation
Your Year-End Bonus
As the end of the year approaches many employers will pay and many employees will receive year-end bonuses. While often the icing on the cake for a productive year employee should be aware of the tax consequences of their bonus. Percent vs. Aggregate Method When it comes to taxing the bonus an employer may choose the percentage method versus the aggregate method. Under the aggregate or wage holding bracket method the employer will use the withholding tables generally used for the employee normal paycheck. Then, the supplemental wages are aggregated with the employee’s normal pay and taxes are withheld accordingly.
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State Income Tax and Retirement Income
On only a few rare occasions does it make sense to defer money to your 401(k) or other employer sponsored plan instead of a Roth IRA. Those occasions include when your gross income excludes you from contributing directly to a Roth IRA (you can still convert), you are currently at a very high tax rate or the case of when you live in a state where retirement income is excluded from state taxation. Here in Illinois, the current law exempts retirement income from being taxed at the state level. What this means, is that any contributions to a 401(k), 403(b), SEP, SIMPLE and 457 avoid state income taxation. Qualified distributions at retirement are only taxed at the federal level, and then only as income. If you contribute directly to a Roth IRA that money is after-tax money going in. After-tax in this case meaning it’s been already taxed at the […]
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What Income is Taxable?
It may be tough to figure out which parts of your income you’ve received over the year are taxable, and what parts are not taxable. This is because certain kinds of income may seem like they should not be taxed (but they are), while other items of income seem like they should be taxed (but they’re not). The IRS has published a Tax Tip to help understand which income is taxable and which is not. The complete text of IRS Tax Tip 2013-12 is detailed below. Taxable and Nontaxable Income Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable: Child support payments; Gifts, bequests and inheritances; Welfare benefits; Damage awards for physical injury or sickness; Cash rebates from a dealer or manufacturer for an item you buy; and […]
Sterling Raskie, MSFS, CFP®, ChFC®
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.