Tax advice from a Fort Wayne CPA

It amazes me how many people decide to have a tax “autopsy” in March or April of every year rather than spend a little time and effort concerning tax planning.  A tax “autopsy” is when a taxpayer has an event that radically changes their tax situation and they do not learn how it will effect them until their tax returns are prepared; those returns are often prepared a few days before the required taxes are due to be paid.  Many people do this and to be honest with you I just do not understand why.

I have performed quite a few tax ”autopsy’s”  in my Fort Wayne office over the last several years.  They occur more often with new clients; however, to be honest with you I experience them occasionally with my current clients as well.

The most common tax “autopsy” I perform is when a taxpayer withdraws funds from a qualified traditional retirement account.  Generally speaking this is a taxable event that will require you to pay Federal income tax, state income tax, and if you are an Indiana resident county income tax.  You may also have to pay a 10% Federal penalty.

Unfortunately people often withdraw money from their retirement account and have either an insufficient amount withheld for income taxes or in many cases have nothing withheld. 

Each year I perform a tax “autopsy” for one or more clients who have withdrawn a large amount of money from their retirement account and had no idea it was taxable.  Recently I had a client who had a tax bill of over $80,000 due to withdrawing a large amount of money from multiple traditional retirement accounts and they had no idea that they would owe any tax at all.  In fact in their situation they could have borrowed the money rather than pay all of that tax if they had only discussed the matter with a Certified Public Accountant who was well versed in the tax laws.

If you have a significant event occur in your life that will effect your tax situation you should contact a Certified Public Accountant who is well versed in the tax laws and discuss the matter; preferably before the event occurs.  If you live in Indiana; especially if you live in the greater Fort Wayne metro area please give one of our CPA’s a call today at 260-338-0833.  We can help you minimize and understand your tax burden. 

Mike Sylvester, CPA/ABV “accredited in business valuation”