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Tax-deferred investments and early withdrawal

Tax-deferred investments and early withdrawal

Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10 percent federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.

IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.

IRA exceptions

The death of the IRA owner: Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

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Taxes: Making the most of refunds

Taxes: Making the most of refunds

With W-2s and 1099s in hand, most folks expecting a refund are lining up to file those returns. The doors are open to the many tax preparers who have waited patiently for the season to arrive. Once the money arrives there are many things that can be done with those much-anticipated dollars. Plan to get the most out of the money and improve your financial position. So, let's discuss a few of the many options of spending the refund checks.

Checking, savings or money market account

One option is to save your refund check for a rainy day or emergency. Experts advise that savings should equal between three and six months of expenses for cushion in the event of layoffs or cutbacks. This rainy day or emergency fund is separate from other accounts to make sure that it is not spent or mingled with the rest of the funds. It is to be used for the mortgage, rent, car repairs and such in times of need.

Instead of spending every cent received, try placing some in a checking, savings or money market account. The Internal Revenue Service (IRS) through direct deposit will place your money electronically into your account as instructed. The IRS will even divide your refund over multiple accounts with the completion of Form 8888, which is the Allocation of Refund Form.

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Taxes: What is my filing status?

Taxes: What is my filing status?

To adequately – and legally – decrease our tax liability we must understand various components of our tax return. Let's begin with filing status.

What is a filing status?

A taxpayer's filing status impacts which tax rate is used and which standard deductions apply when calculating federal income tax for the year. For the most part, five different statuses are considered. They are: single, head of household, married filing separately, married filing jointly and qualifying widow/widower with dependents.

Keep in mind that there may be exceptions to the rules that may be more beneficial to you. So, speaking with a tax professional is recommended. Let's review the categories to determine which status applies to your situation.

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Overcoming retirement challenges

Overcoming retirement challenges

In a 2013 survey of people aged 50 to 70 with $100,000 or more in investable assets, 90 percent reported that they had experienced at least one setback in saving for retirement. In fact, the average respondent had experienced four setbacks with an average loss or missed opportunity of $117,000.

The future is always uncertain, and as the saying goes, "Life happens." It would be wise to prepare for the unexpected and react logically rather than emotionally when faced with retirement challenges. Here are some obstacles you might need to overcome.

Surviving market downturns. More than half of those surveyed said their assets had been reduced by market losses during the Great Recession. Yet another survey suggested that about 50 percent of workers who were 32 to 51 when the recession started actually showed gains in their retirement accounts during the 2007 to 2009 period. This group may have had lower balances when the recession began, and it's likely that they continued saving throughout the downturn, which might have helped them benefit when the market started to improve. Remember that all investments are subject to market fluctuation and the potential for loss.

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Tax season means it’s time to focus

Tax season means it’s time to focus

As employees receive W-2s and independent contractors receive 1099s, many will be anticipating a refund and others may owe money. The connecting bottom line is that taxes must be filed in a timely manner.

Those expecting a refund usually will rush to file as soon as possible. While those expecting to owe the Internal Revenue Service (IRS) will frequently wait until the April 15th deadline.

Many years ago, there were only a few major tax preparation firms, along with accountants, that prepared taxes. Now, small businesses dedicated solely to tax preparation have sprung up all over the Mid-South. These businesses are thriving and experiencing tremendous growth with a business model based on operating only a few months of the year.

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Borrowers beware: payday loan tax filing is legit

Borrowers beware: payday loan tax filing is legit

On the surface, it looked like a clear-cut case of identity theft and tax fraud. A Memphis woman uses a popular income tax filing software system to file her taxes, but she is blocked from completing the process because the system shows that her taxes have already been filed. Immediately, she believes that tax fraud villains have stolen her identity and refund.

Later, a painful possibility comes to light: She, herself, authorized a tax preparer and short-term lending office to electronically file her taxes.

"I am a tax-preparer myself," said Marcia Bonds of Memphis. "So why would I go and pay someone else to file my taxes? I work for a tax office."

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  • Written by Dr. Sybill C. Mitchell

Spotlight Productions & the business of videography

Spotlight Productions & the business of videography

Even as businesses grow and expand, there is a never-ending need to connect with customers. One way to assist in that outreach is the strategic use of commercials.

When I first started a business in Memphis I used the services of Spotlight Productions to create my website and my very first commercial. The result was incredible for a new business. Over the years, Spotlight Productions – co-founded by Fabian Matthews – has become a major player in the video, commercial and web arena. This week Matthews shares his journey.

Carlee McCullough: Tell us about yourself.
Fabian Matthews: I'm a graduate of Arkansas State University in Jonesboro. I'm married, with 2 kids, Darion and Mia. I've won 3 Emmy Awards and 8 Telly Awards. My First job in TV was at KAIT in Jonesboro and then WMC-TV in Memphis. I started Spotlight Productions in 1999 with Isaac Singleton and Craten Armmer.

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