When it comes to managing personal finances, it can be tricky to know how to proceed. While many people start focusing all of their energy on taking care of the things they need at the moment, the truth of the matter is that there are a lot of things you can do to disrupt your finances that may be easy to ignore at first. For starters, it is crucial to move forward and identify tax issues, even if you haven't focused on them quite yet. Check out these short posts to learn more about how you could be faced with tax problems, and how to resolve the situation for the long run.
Are you considering retirement but still have outstanding tax debt? Then now is the time to resolve it. Why is this so important now? Here are five of the most compelling reasons.
1. Retirement Withdrawals May Be Seized
Generally, retirement accounts are not subject to seizure by the IRS or during bankruptcy. But once you begin to withdraw from these accounts, they become your income rather than a protected asset. This opens them to use by the IRS to pay outstanding debts, depending on your particular circumstances. The best way to protect this income, then, is to avoid being subject to IRS debt rules at all.
2. Social Security Is At Risk
Few creditors can access your Social Security payments to get repayment of debts. Unfortunately for retirees, though, the IRS and state tax agencies may be one of the few exceptions. As with other retirement income, Social Security checks can be levied to repay old debts. While this is generally capped at 15%, many Americans rely on their Social Security payments to make ends meet.
3. Your Income Will Be Fixed
When you move from a regular paycheck to a fixed retirement income, control of expenses is more important than ever. You can't control all expenses, but doing so whenever possible is vital to staying within your budget. By resolving old tax debts before you make income and expense adjustments for retirement, you know what you actually have to work with.
4. Your Finances Are Simpler
Retirement is already a complex process for many Americans. You are moving to a new source of income with new rules. You may be withdrawing from multiple accounts. You'll have to reassess your expenses. You may even be downsizing or moving. Carrying old debts into this period is one additional complication you can — and should — avoid.
5. It's a Fresh Start
As you move into this new chapter, you deserve a fresh start and a clean slate. Whatever old tax issues you may have had years ago shouldn't follow you into your new adventure. As you permanently resolve these before you move forward, you can do so with more confidence and fewer worries.
Which of these benefits could you use the most? Whether you need to protect your income, reduce expenses, or just streamline your life, tax debt resolution will improve your ability to enter retirement successfully. Learn more about your options by meeting with a tax resolution service in your area today.
Share3 November 2020
