Monday, January 09, 2017
Fruit cake and taxes
The holidays are over, and we face the New Year with renewed energy and focus. The same cannot be said about the tax code. Within a few weeks, we will be inundated and buried under a cascade of 1099s, W-2s, interest statements, Schedule Cs and 1040s produced from our incomes, required minimum distributions, pensions, mutual funds, stocks, Social Security, etc.
As we assemble these documents into a neat little pile, it is a good time to remind ourselves of that fruit cake we received from Great-Aunt Beatrice. You know…it arrived shortly before Thanksgiving, resigned to its space on the counter top between the toaster and the telephone.
The income received from interest in dividends, capital gains, income, salary and interest paid out over the course of the year is a lot like the fruit cake. Each ingredient might be good as it stands by itself; however, if mixed together it becomes a tangled nutty slab of waxy green and red fruit!
That’s why it’s important to review the vehicles and investments from which the income is received. If you find yourself owing the IRS, perhaps moving a portion of your portfolio to municipal bonds—on which the income is not taxed federally—will alleviate this burden. Or, maybe a tax-deferred vehicle, such as an IRA, to limit the amount of income might be suitable.
The bottom line is that no matter what your income goal or tax situation is, the team at Dupaco Financial Services has a solution for you.
by Michael Poppen