46 million Americans are age 65 or older and, not surprisingly, more and more continue to work well past the “traditional” retirement age.
With nearly a quarter of senior men and about 15 percent of women remaining in the labor force, those who are filing may find completing their tax returns a little more complicated.
In 2016, Baby Boomers-aged 52 to 70 are either planning for retirement, beginning their retirement or fully into retirement. With each of those markers, there are tax incentives to consider.
“You can’t just make a blanket assumption that just because you’re retired you don’t have to pay taxes anymore,” said Katherine Pickering, executive director of the tax institute at H&R Block.
If you’re retired and your only income is social security, your benefits may not be taxable.
Some retirees might not even need to file. But if you receive income from other sources— a pension, your retirement plan or a job— it’s likely you’ll have to pay up.
“Your social security benefits are taxable depending on the other income. If you’re drawing other benefits, if you’ve got any kind of a supplemental income, that can all factor into that equation,” Pickering said.
If you’re working for a business, your employer will withdraw taxes from your paycheck. But if you’re self-employed, you are responsible for the taxes on that income.
If you have a retirement plan, Pickering says you don’t want to take money out of your retirement account before the age of 59 ½, or you could be subject to a 10 percent early withdrawal penalty.
“On the other end of the spectrum, you need to start withdrawing money by age 70, and that’s what they call the “required minimum distribution in order to avoid penalties,” Pickering said.
For seniors with questions about filing their 2016 taxes, check out IRS publication 554: “The 2016 Tax Guide For Seniors.”