It seems we are constantly paying; discussing and always thinking about the implication(s) taxes have on our lives. In particular our financial lives.
Well, for most of us it is that dreaded time of the year again. There is very little we can do now to alter our tax liability for 2006. There still are a few simple steps to take today:
- If you need a tax deduction, you have until April 16, 2007, to establish your 2006 IRA contribution. The phase out for deducting IRA contributions, (assuming you are an active participant in a company sponsored plan), are:
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Filing Status
Joint
Single/Head of Household
Spousal IRA
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Income Limits
$75,000 – $85,000 AGI
$50,000 – $60,000 AGI
$150,000 – $160,000 AGI
[/twocol_one_last]The minimum contribution limits are $4,000 per person. If you are age 50 or older, Uncle Sam allows you to contribute an additional $1,000 per person.
- If you meet the income requirements, you have until April 16, 2007 to make a contribution into a ROTH IRA. Phase-out Limits for Contributions:
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Filing Status
Married/Joint
Single/Head of Household
Married/Separate
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Income Limits
$150,000 – $160,000
$95,000 – $110,000
$ 0 – $10,000
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- If you own a business and need to shelter some profits, you have until your tax filing due date plus extensions to establish and contribute to a SEP IRA.
Keep in mind that any current employee who has worked for you for 3 of the last 5 years and has earned compensation of at least $450 per year must be included. The maximum contribution limits are 25% of up to $220,000 of compensation or $44,000 which ever is lower.
- If you are 70 ½ or older, review your Required Minimum Distribution requirements to make sure you have accurately withdrawn those distributions. The penalties are quite high for not taking out enough.
- Review your 1099’s or 1099R’s to make sure they are accurate. Sometimes dividends, interest, short or long term capital gains, have been reported incorrectly.
On the bright side, there is much we can do in 2007 to avoid repeating past mistakes. (In a future article, I will elaborate on strategies you can use). It is a good idea to discuss the affects of your financial decisions with your team of advisors (Financial Planner, CPA/tax advisor and attorney) before decisions are made to avoid negative and costly consequences.
Pat Grenier is a General Partner with BRP/Grenier Financial Services in Springfield, MA. Securities offered through Cadaret, Grant and Co., Inc., Member FINRA/SIPC. BRP/Grenier and Cadaret, Grant and Co., Inc. are separate entities. Pat can be contacted by phone at (413) 736-6712, or email her at pat@brpgrenier.com
