• Tax Tips

    Jackson Hewitt wants you to get all the deductions and credits you’re entitled to! For that reason, we invite you to view our list of 2016 tax tips and tactics designed to help you reduce your tax burden.

  • IRAs and Retirement

    Early Withdrawal

    There is no additional 10% tax on early withdrawals up to $10,000 in your lifetime from an IRA if you are buying a first home for yourself, your children, or your grandchildren. There is also no additional 10% tax if you are paying higher education expenses for yourself, your spouse, your child, or your grandchild.

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    You can contribute up to $5,500 to your IRA (or $5,500 to your spouse's IRA if married filing jointly). Each taxpayer age 50 or older is eligible to make an additional $1,000 "catch-up contribution".

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    The IRS allows you 60 days to place the funds withdrawn from an IRA or pension plan into another IRA or pension plan. Only one rollover is permitted to your IRAs in a year. You can do unlimited trustee-to-trustee transfers; where the institution holding the funds transfers the funds directly into another account. The IRS may waive the 60-day requirement for rollovers from pensions or IRAs if you suffer a casualty, disaster, or other event beyond your reasonable control that prevents meeting the 60-day rule.

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    Retirement Saving Contribution Credit

    There is a credit for a percentage (50%, 20%, or 10%) of up to $2,000 of the contributions you make to your employer sponsored pension plan or your IRAs. In order to claim the credit; you must be at least 18, you cannot be a more than a half-time student or claimed as a dependent on another's return. Any distribution from a retirement plan in the last two tax years, the current tax year, or any day up until the due date of the current year’s return will reduce the amount available for the credit. This is one of the few areas in the tax code where you can claim both a credit and a deduction on the same monies.

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    Roth 401(k)

    If you are eligible to participate in a 401(k) or 403(b) plan through your employer you may designate a portion of our elective deferral to be treated as a Roth contribution. These contributions will be treated as regular income on Form W-2. Distributions from these accounts will be tax-free under the same provisions as a Roth IRA.

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    Roth IRA

    You can elect to contribute up to $5,500 to a Roth IRA. If you are age 50 or older, there is an additional "catch-up" contribution allowable of $1,000. The Roth IRA differs from the traditional IRA because contributions are not deductible but, when withdrawn, the earnings are not taxable.

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    The myRA is a new Roth IRA program offered by the U.S. Treasury. It is designed as a way to encourage taxpayers with no retirement plan available through work to invest in their retirement. The myRA invests in a retirement savings bond (similar to a traditional savings bond) and guarantees a return on investment. An individual can invest up to $5,500 a year ($6,500 if 50 or older) but is not required to make a minimum investment to open their myRA or to keep it. For more information go to myra.gov.

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