Tax Season Prep: Taxes and More

Posted March 18, 2017

Tax season is upon us, and you may be getting ready to file by the April 18 deadline. Typically, the deadline for taxes is April 15, but because that date falls on a Saturday and April 17 is a legal holiday, the tax deadline has been pushed to April 18 this year. Here are a few things to keep in mind:

  • If you are working , you should receive a W-2 from your employer. If you have a taxable investment account, you should receive a 1099 Composite form. If you are receiving distributions from a retirement account, you should receive a 1099-R form.
  • For clients of Bell Investment Advisors who have accounts at Schwab: 1099 Composite and 1099-R forms are both currently available; 1099 Composite forms are generally mailed out mid-February and 1099-R forms go out in early January.
  • We recognize that clients might want to lower their tax bills, and we can assist with year-end harvesting of any investment losses. It is too late to do anything further for 2016, but keep this in mind for 2017.
  • The professionals at Bell Investment Advisors are not tax experts, but some of the work we do for our clients directly impacts their taxes. If you have questions about your specific tax situation, we recommend that you consult with your CPA.


April 18 is also an important deadline for IRAs.

  • April 18 is the deadline for making contributions to a Traditional or Roth Individual Retirement Account (IRA) for the tax year — in this case, 2016. If you did not make a contribution by December 31, 2016, you still have time. Unless you are subject to contribution phase outs*, you may contribute up to $5,500 (and an additional $1,000 if you are age 50 or older) to a Traditional or Roth IRA as long as you do it before the April 18 deadline.
  • Traditional and Roth IRAs have tax benefits, but they differ from one another. With a Traditional IRA, you are able to defer taxes paid on earned income today and allow that money to grow tax-deferred. This can be beneficial especially if you expect your tax rates to decrease when you are older and in your retirement phase. As for a Roth IRA, you do not receive the tax deduction on today’s earned income, but the benefit is that your contributions grow tax-free. Roth IRAs are the better choice if you expect your tax rates to increase when you are in retirement and accessing the funds. The one caveat with IRAs, like most retirement accounts, is that you cannot gain access to the funds penalty-free before the age of 59½, with a few exceptions*. Before you make a contribution for 2016, be sure that you do not need that money for your current living expenses.
  • The tax benefits of contributing to a Traditional or Roth IRA are great, especially over a long-term horizon and if you are making regular annual contributions. So when you are filing your taxes for the April 18 deadline, do not forget to consider contributing to an IRA for 2016.

 

*If you have questions regarding the contribution phase outs, exceptions to withdrawing funds from an IRA, or any other tax issue, please contact your CPA.

 

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