Tax Tips

• Lower income tax withholding

Now that you have only one wage earner in the family, you may be able to lower the amount of federal income tax deducted from your remaining paycheck, thus increasing your cash flow. Contact the human resources or payroll department at your place of work to discuss this issue.

Don’t be tempted to under-withhold tax, or you will end up with a tax bill at the end of the year.

• Daycare

If you have a dependent care option in your flexible spending plan at work, you are eligible for reimbursement for child care expenses incurred while your spouse is either in the workforce or actively seeking employment. Conversely, you are generally not eligible if your spouse is either not in the workforce or not actively seeking employment.

• 401 K Accounts

When times are tough financially it is often tempting to pull money out of an IRA or 401K. This can be a very expensive way to obtain funds. If you are under age 59 ½, you will pay regular income tax plus a 10% penalty on the withdrawal. However, you could reduce or eliminate contributions to your 401 K plan instead; unfortunately, this move could also cause you to lose matching contributions from your employer.

• Health Insurance

If you and your spouse had health insurance coverage through your employers, you now have to decide whether to add your spouse to the coverage through your employer or elect COBRA coverage through his or her former employer.

Choosing the spouse’s plan usually allows you to pay your premiums with pre-tax dollars.

The ability to be covered under COBRA coverage does expire at some time. If considering COBRA, be sure to consider the length of time you will be able to have coverage.

Joe

Learn more about Joe DePetris, Jr., and IBO tax return preparation and tax issues at IBO Bookkeeping 101.

Find more Tax Tips for IBOs from Joe DePetris, Jr., CPA.

This article is provided as an educational resource for your guidance, and is strictly informational. It does not constitute legal, accounting, or other professional counsel. Nothing included herein implies a recommendation by the author, the IBOA International, or Amway Global, of any course or method of regulatory compliance. Readers and users who intend to take, or refrain from taking, any action based on information contained herein should first consult with their qualified tax advisor, preferably a C.P.A., or appropriate regulatory authorities.