Retirement Planning – Which Plan is Right for You?

Goodbye, 2017… Hello, 2018!

But wait… the end of the year means … tax season is soon to follow!

Yes, taxpayers will soon be making some pretty hefty decisions. And if you’re retiring, even more so! How can you plan for retirement now? Here are some hints and tips to help you make smart fiscal decisions as the year draws to a close.

What kind of retirement plan should you choose? 

Today, many companies offer both a traditional 401(k) and a Roth 401(k). Here’s how to know which one’s for you:

  • If you are in a lower tax bracket, you might prefer the Roth 401(k). You’ll receive rather significant tax-free withdrawals in retirement.
  • On the other hand, if you are currently in a higher tax bracket and want an immediate tax reduction, you might want to opt for the traditional 401(k). However, even if you are in a higher tax bracket now, you might still want to have a source of tax-free cash flow during retirement. If that’s the case, then go for the Roth 410(k) plan.

In 2017, the maximum you can contribute to a 401(k) is $18,000, plus an additional $6,000 if you are over the age of 50. If you don’t want to maximize these amounts, might consider paying off your credit card bills. Remember, credit card interest is not tax deductible, so it’s beneficial to pay down those credit card balances now. With regards to a home mortgage or student loans, the decision may not be so cut and dry, as these types of interest can be tax deductible.

What if your company does not offer a retirement plan? 

Open and fund an IRA account. Keep in mind, the due date to do so is April 15th, regardless of when you file your taxes.

For IRA withdrawals, IRA owners must take distributions after the age of 70.5. Carefully plan out how much you’d like to withdraw before year-end to keep taxable income low. With the money you withdraw, you could give it to your loved ones, reinvest it elsewhere, move it to a Roth IRA (for a tax-free future), or simply spend it on yourself!

Just like a 401(k), you can choose between a traditional IRA and a Roth IRA. Depending on which tax bracket you find yourself in, the benefits to opening either a traditional IRA or a Roth IRA or similar that of traditional and Roth 401(k)’s. In short:

  • If you are in a lower tax bracket, consider opening a Roth IRA.
  • If you are in a higher tax bracket, consider opening a traditional IRA.

When should I make charitable contributions?

To answer this question, you might want to consider when you’d like to experience a tax deduction. If you write a check to your favorite charity in December, your tax deduction is soon to follow in April! However, should you decide to wait until New Year’s, you’ll have to wait a year before receiving the tax benefit.

Furthermore, if you have stocks or stock funds that have gained value over time, you could choose to give appreciated securities to your favorite cause instead of a check. You’ll still be making excellent use of your funds while helping those in need!

We understand that retirement planning can be complex and confusing. Your financial future is as important to us as it is to you, so feel free to contact us if you’d like further tax planning assistance!

When Does Tax Season Start?

While you may be planning to spend the last moments of December 31st counting down to the New Year (Yay, 2018!), we at Alfano & Company will spend them counting down to the new tax season (Yay, 2017 taxes!).

It’s natural to feel that tax season doesn’t start until sometime in April. After all, you have until April 16th to file your return and so surely you can just quickly take care of it a couple of days before the deadline, right? Or you might think you should file on January 1st – after all, you don’t want to wait too long for your tax refund! However, the real start of tax season falls somewhere in between.

You can certainly start gathering your tax documents in early January if you so wish. However, if you’re waiting on a W2 or 1099 from an employer don’t expect to receive it right away. Employers have until January 31st to mail these tax forms to you, so you might be checking the mail box every day until early February before you can provide everything to your tax preparer.

Say you miraculously receive all of your tax forms the first week of the year; you can file then, right? Not quite. The IRS doesn’t open their virtual doors until January 22nd so you won’t be able to e-file until then. [Jan 22 filing date NOT confirmed – check IRS press release for actual date sometime in December]

Even if you file right on January 22rd, you may experience some difficulties retrieving your refund. Last year Congress passed a law that requires the IRS to hold refunds on tax returns where the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) is being claimed. The IRS must hold the entire refund amount until at least February 15th.

However, just because there’s a lot to wait for in the early stages of tax season it doesn’t mean you should procrastinate and file in April instead. By waiting until April you’re up against the rush of the deadline. There’s a chance you’ll have forgotten to provide your tax preparer with all necessary tax documents, and by the time you gather the remaining information needed to file your return you can end up running out of time!

What do we suggest?

Start gathering your documents as soon as they start arriving in the mail. Make sure you keep them in a safe place so that you don’t have to search your house for your W2 10 minutes before your scheduled appointment with your tax preparer. Schedule your appointment for some time during the second half of February; at this time of year Alfano & Company will be open on Saturdays and certain evenings, so we’ll be more than able to meet with you a time that works well for your schedule! This will give your tax preparer ample time to work on your return, ask for any missing information, and still have plenty of time to complete your return before the deadline. You’ll feel at ease knowing that your tax preparer didn’t feel rushed when working on your tax return!

At Alfano & Company, we’ll need your tax forms by March 19th. Even if you don’t have everything ready by this date, please provide us with everything you currently have at that time. This will allow us to begin work on your return before the April rush begins.

If you’re wondering what tax information we’ll need, you can find a handy list here. And when you are ready to schedule your appointment, click here. We look forward to working with you this tax season!

Micalah Bowden, Office Manager

Team Spotlight: Wendy Gonzalez

Let’s face it – daily managing your financials and keeping track of all tax related documents and duties can be quite stressful. We’ve all been there! That’s why at Alfano & Company, we strive to make any and all interactions with our clients as pleasant as possible. How? We believe an administrative team should be professional, personable, and perceptive to the needs of customers. Our team is always equipped and eager to assist all of our clients. Thus, we’d like to use this opportunity to turn the spotlight on one of our valued administrative team members, Wendy Gonzalez.

Wendy At The Office

Wendy has been an integral part of the administrative team at Alfano & Company for over one year! Over the course of this year, she has enjoyed assisting and truly getting to know many of our clients. Whether she is scheduling appointments or gathering needed information for bookkeepers and tax preparers, Wendy puts high priority on delivering the best customer service. She beams with pride when she witnesses our entire administrative team uniting to respond attentively to client needs.

At Alfano & Company, we believe there is no cap on education. Each team member is consistently striving to learn more about their position and how their role works in tandem with the roles of those around them in order to improve the quality of our services. How does Wendy continue to grow in her field of work? She explains, “Alfano & Company has been providing me with ongoing training…regarding accounting principles and technologies.” Wendy is involved in weekly accounting classes and various continuing education courses. This has enhanced her ability to lend a helping hand to the clients she interacts with on a daily basis. She says, “Having this education allows me to provide better service to clients at Alfano and Company.  Knowing bookkeeping terms and what is involved when preparing a tax return allows me to answer client questions and make sure we have what we need from them to provide our services.”

Aside from emphasizing continuous education for an efficient and effective work environment, we also treasure team work to maintain high morale. Wendy says, “I enjoy working with a group of people that are dedicated and fun. The collaborative environment is great here. Everyone’s role is important and valued. It has been a great experience to learn and grow from.”

Wendy After Hours

Where can you find Wendy when she’s not helping clients at the office? It’s very likely she’s helping people in our community! Wendy has been involved in a volunteer work for at least 10 years and takes pleasure in reaching out to those in need. She also appreciates spending time with her friends and family and engaging in various exciting activities such as trying a new latte flavor, catching a movie, thrift shopping or exploring a new city! She says “…I’m happy if I’m with good people and in good conversation.” We appreciate Wendy for this!

Does this sound like the staff of the firm you’re currently using? If not, how would you like to interact with knowledgeable, friendly people who are dedicated to taking care of your personal financial needs?

We pride ourselves in attentively caring for each and every one of our clients.

Click here to find out how our team can help you!

Alfano & Company Team
Alfano & Company Team