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Tax Considerations for the Working Individual Reviewing 2018 Returns – Qualified Plans

When you’re planning your 2019 tax strategy, you’ll find a review of your 2018 return a helpful tool in determining your potential tax responsibility for this year. Many tax issues are covered in consideration of family issues, income, and investments, but if you have qualified plans, there are just a few more loose ends to wrap up during your tax review.

This article is third in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

Here are some of the qualified plan issues you should consider:

 

 

Are You Contributing to a Traditional IRA?

If you’re actively contribution to a traditional IRA, bear in mind that the maximum contribution is $5,500 ($6,500 if you are above age 50). Consult Schedule 1, Line 32 for more information and ask your tax advisor for information about whether or not you can make any further deductible contributions.

 

Are You Contributing to a Roth IRA?

Similarly, Roth IRA contributions cap at $5,500 ($6,500 if you are above age 50) per year. However, unless you’re taking advantage of the Retirement Contribution Savings Credit, you will not report these contributions on Form 1040.

 

Do you Have an Inherited IRA?

If you have an inherited IRA (or multiple inherited IRAs), you need to ensure that you’re meeting your RMD for the year. Look to form 1040, Line 4a and 4b to see whether this has been satisfied and reported.

 

Are You Contributing to an HSA?

While you can deduct HSA contributions, you need to keep contribution caps in mind. For the individual, there is a $3,450 cap ($6,900 family). Additionally, if you contribute to your HSA through payroll, then you will find information about your lower wages on Form 1040, Line 1, as well as on your W-2 and paystubs.

 

Have You Made a Contribution to a Non-Deductible IRA?

If you have ever contributed to a non-deductible IRA, you will need to ensure that the cost basis is properly tracked. Look at Form 8606 to understand how your contribution should be accounted for.

 

Have You Taken a Non-Qualified Distributions from:

An IRA?

Early, non-qualified IRA distributions are penalized and you’ll see this when you file your taxes. To find a non-qualified early distribution, look at Form 1040, Line 4b. Then consult Form 5329 for penalty calculations and carry over to Schedule 4, Line 59.

 

A 529 Plan?

You will also use Form 5329 to calculate the penalty for an unqualified withdrawal from a 529 Plan, if applicable. Since a 529 Plan has very specific withdrawal requirements, you’ll want to work with a tax professional to understand whether any withdrawals you took were qualified or not.

 

Did You Convert a Traditional IRA to a Roth IRA?

If you converted an amount from a traditional IRA to a Roth IRA, you need to report this amount properly. Consult Form 8606 for more information about reporting the converted amount and that any non-deductible IRA contributions converted are treated as non-taxable.

 

Did You Rollover Funds from One Retirement Account to Another?

You may have moved funds from a 401(k) to an IRA or another account. If so, you want to treat these funds as a rollover and not a distribution, since a distribution may cause penalty and other unforeseen expenses. Form 1040, Line 4a should reflect the amount rolled over and Line 4b should be $0 if no distributions occurred.

These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the working individual, consult our resources on family and filing issues and reporting your investment income.

This article is third in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.

Tax Considerations for the Working Individual Reviewing 2018 Returns – Investments, Income, and Other Issues

Investments and income are typically the two biggest players in your tax plan. After all, these are likely to be your primary sources of personal revenue.

When it comes to planning your tax strategy, you need to consider a variety of factors related to your income and investments, as well as some various issues that are related to these categories. Here are the top considerations to make for income, investments, and other issues.

This article is second in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

Investment Income Issues

Depending on your specific investments, there are a few areas on your 2018 return to check and ensure whether you’re on the right path for your 2019 tax strategy.

 

Interest

Are your investments earning interest? (Review From 1040, Lines 2a and 2b) Did you receive any dividends? (1040, Lines 3a and 3b) If you answered “yes” to either of these questions, you need to reference Schedule B for more information about which accounts are generating interest and whether dividends earned are qualified or ordinary.

 

Income and Investments

If you’re self-employed and your income is greater than $200,000 ($250,000 married, filing jointly), you may be required to pay and additional Medicare tax at 0.9% (consult Form 8959). For all working individuals, if your income is greater than $200,000 ($250,000 MFJ), and you have high Net Investment Income (see Form 8960), your income may be subject to a Net Investment Income Tax at 3.8%.

 

 

Capital Gains

Remember, your capital gains and losses also count toward your income and make a difference at tax time. For capital gains distributions, consult Schedule D, Line 13; for losses look at Schedule D, Lines 6 and 14. Verify whether short- or long-term loss carryovers are properly accounted for.

 

Income Issues

While you’re probably already making notes of income changes from 2018 to 2019, here are some specifics to focus on during your review.

 

W-2 Employees

If you’re a W-2 employee, you’ll want to review your W-2 for any HSA and FSA contributions from both your employer and your pre-tax income. Additionally, you need to review your retirement plan contributions and employer matching.

 

Stock Options

If you are part of an employee stock option or have any other type of equity compensation, you will need to consult your 2018 return to see how this impacted your tax strategy during the last year. Look at your W-2 and Schedule D to learn more about how your get a better understanding of your tax responsibility for exercising or selling your option. If you filed an 83(b) election, ensure that you prepare one this year as well.

 

Other Issues

There are, of course, some odds and ends issues that are difficult to classify with other categories. However, when you’re filing your taxes, it’s important to account for all of your financial activities. Here are some additional issues you want to watch out for.

 

State-Specific Issues

You will want to take a look at your state return, in addition to your federal one, to look for specific issues unique to your locale. If you have recently moved or earned income in another state during the calendar year, consult a financial professional to learn about the tax laws that apply to your situation.

 

Real Estate

If you have real estate investments, consult Schedule E to see how to properly claim your rental income.

 

Student Loans

You may be able to claim interest paid from student loans if you paid any this year. Look at Schedule 1, Line 33 to see whether the deduction applies to your situation.

These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the working individual, consult our resources on family and filing issues.

This article is second in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor. 

Tax Considerations for the Working Individual Reviewing a 2018 Return – Family and Filing

With the end of the year in sight, it’s time to take a look at your 2019 tax strategy. One of the ways that you can prepare for the upcoming tax season is to look back at your 2018 return to see how your tax strategy worked out the last time you filed.

This article is first in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

Here are some issues to keep in mind when reviewing your 2018 return:

 

What Deduction did You Claim?

If you claimed the standard deduction of $12,000 ($24,000 married), you may consider bunching charitable donations into one year. You may also decide to accelerate or prepay certain future expenses, like medical expenses or property tax. (Consult Form 1040, Line 9)

 

Are You Married?

Married couples have certain tax considerations that they should review yearly in order to make the most of their tax strategies. If any of the following apply:

  • You and your spouse have a large disparity in incomes
  • You have a number of large itemized deductions
  • You or your spouse have income-based student loans

 

You may consider filing separately to offset your tax liability. Run the numbers for both married filing jointly and married filing separately to see how your estimated tax liability is impacted.

 

Have You Been Divorced or Lost Your Spouse?

If it’s been a personally traumatic year, one of the last things on your mind might be your tax status. But if you have lost a spouse or been through a divorce, you need to review your filing status to ensure you’re in the correct category. (Review the top of Form 1040)

 

Do You Have Dependents?

If you have children and make less than $200,000 ($400,000 for couples), don’t forget to take your child tax credit. (See Form 1040, Line 12)

  • Are your children under age 13? Look to see whether you can claim additional deductions for child care. (Consult Form 1040, Line 12, and Schedule 3, Line 49)
  • Do you have dependent children in college? Are you in college?
    • If your income is below $58,000 ($116,000 married), check to see if you claimed the Lifetime Learning Credit in 2018. (Look at Schedule 3, Line 50)
    • If your income is below $90,000 ($180,000 married), check to see if you have previously claimed the refundable portion of the American Opportunity Tax Credit (Form 1040, Lines 17c)
  • Do you have non-child dependents that you can claim? In some cases, you may be able to claim a parent or another relative as a dependent and receive a Child and Dependent Care Tax Credit, as well as relevant medical expenses that you spent on that dependent.

 

 

Was There any AMT (Alternative Minimum Tax)?

If you had AMT in 2018, consider possible strategies to reduce it. These might include minimizing capital gains or maxing out retirement contributions to lower your income. You will also want to see whether you received a credit from paying AMT in 2017. (Consult forms 6251 and 8801)

 

Did You Have an Unexpected Outcome from Your Filing?

When you filed in 2018, did you need to pay more taxes than you expected? (Consult Form 1040, Lin 22) Or on the flip side, did you end up with a bigger return than you anticipated? (See Form 1040, Line 19) If you ended up with an unexpected outcome from your 2018 filing, you may want to look into whether this was an anomaly. Compare information from the past few years to see what might have changed.

 

Did You Withhold Enough in 2018?

If you failed to withhold enough taxes, you may have to pay a penalty. (See Form 1040, Line 23 and Form 2210). In the past, you would be responsible for 90% of your current tax liability, but the IRS changed this to 80% in 2018.

These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the working individual, stay tuned for information about reporting your investment income and other issues.

This article is first in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.