March Madness and Taxes

March Madness is here! Yes, there’s the NCAA tournament, but the author reminds readers that it’s also tax season and provides some general tips to keep in mind as April 15th approaches.

This article was co-written by Brett O’Brien

March Madness is here! The NCAA college basketball tournament is the second largest grossing sports event in America, slightly behind the Super Bowl. Though the tournament is set to begin on Tuesday March 17th, the real March Madness has already begun: tax preparation and planning!

Proactive tax planning means more than completing your tax return by April 15th. As our country tackles it’s massive debt and entitlement program obligations, additional taxes, including tax on retirement accounts, college saving accounts and the so called “Fair Share Taxes” leads for concern about where taxes will be 10, 15, or 20 years from now.

Today we have choices: (1) we can choose to ignore the pending threat of higher taxes, and cross our fingers that they do not go up, or (2) we can implement some strategies to insulate and buffer ourselves against higher taxes. It’s time to lace up your shoes, get on the courts, and win yourself a financially secure future. Remember, we also still have a free TV to give away: just let us know what you are doing today to add more tax efficiency and shelter yourself from higher taxes, and you’ll be entered in the raffle.

To help you with the process here’s our Final Four Tips!

1. Create a financial plan

Working with a professional to get an overall financial plan done, can help to identify opportunities for more tax efficiency. Some people like to do things on their own, and that is perfectly okay, but the value that a financial professional can bring cannot be overlooked. There are many things that can be accomplished through hard work and learning from your mistakes but your finances should not be one of them. This is not just money, it is your security, comfort, and even your freedom to live the type of lifestyle you want to live. Whether or not you choose to do your retirement planning on your own, it is a wise decision to at least get a second opinion from a financial professional to make sure you’re making the right decisions for your individual needs. Living in the future can be harmful, but planning for the future is essential to financial success.

3. Stay organized

This is key to every aspect of financial success, especially your taxes. Misplaced documents or unrecorded transactions can drastically affect not only your tax liability or refund but your ability to maximize the tax laws in your favor. Take inventory of all potential sources of income such as pensions, Social Security, IRAs, Roth IRAs, employer retirement plans, and personal savings. Understanding the tax treatment of each source can help you determine the most efficient way to take distributions.

3. Pay Taxes on the Seed

Tax changes increase the importance of tax planning. If you have most of your retirement savings in a tax deferred retirement plan, Ed Slott, referred to as America’s IRA expert, says: “Your tax deferred retirement account (IRA, 401K, TSP, etc.) is not just your savings. You have a silent partner who gets to choose how much he is going to take out of that account every year. The silent partner’s name is Uncle Sam.” Contributing to accounts that will not be taxed at retirement such as a Roth IRA or Roth 401(k), may prove to be very valuable in retirement. Click here to learn more about paying taxes on the seed, not the harvest.

4. Stay Informed

Staying informed is the key to success in life. Especially in this day and age, knowledge is power. Are you aware of the different changes for taxes in 2015? Have you explored Roth conversion opportunities? Are you utilizing “Tax Smart” asset allocation strategies? If you do charitable gifting are you giving appreciated assets to charities? We have plenty of resources available to help you stay as informed as possible. Remember it’s better to work smarter than work harder. Follow us on twitter for the most up to date information we have to offer!

Carol Schmidlin does not provide tax and/or legal advice, but will work with your attorney or independent tax or legal advisor. A qualified tax professional or independent legal counsel should review the tax implications of any securities transaction. This material is not intended to replace the advice of a qualified attorney, tax advisor, financial advisor, or insurance agent.  Before making any financial commitment regarding the issues discussed here, consult with the appropriate professional advisor. Franklin Planning does not offer tax planning or legal services, but will provide references to accounting, tax services or legal providers. They will also work with your attorney or independent tax or legal advisor.

About the Author

Carol Schmidlin, Certified Financial Fiduciary®, MRFC® is the President of Franklin Planning and has been advising clients on how to grow and preserve their wealth for 25 years. In addition to her financial planning practice, she is the founder of FedSavvy® Educational Solutions, which provides Financial and Retirement Literacy Programs for Federal Employees. She is passionate about helping families with all phases of Wealth Management and is a member of Ed Slott’s Master Elite IRA Advisor Group. Her practice maintains a home office in Sewell, NJ along with a satellite office in Washington, DC. Carol can be reached at (856) 401-1101.