Tax season is a great time to evaluate your current tax situation and enact a few changes to avoid issues with the IRS. Start by evaluating whether the correct amount of taxes is being withheld, confirming your Required Minimum Distributions (RMDs) are on track, verifying the accuracy of your deductions and if you’re correctly listing charitable deductions on your return.

Although updating your W-4 is a great place to start, here are a few more ways you can save: 

• Save more into a pre-tax-sheltered retirement savings account.

• Fully fund or increase your contribution into a flexible spending account (FSA) or health savings account (HSA)

• Determine if you’re eligible for the earned income tax credit (EITC)

• Evaluate if you qualify for the alternative minimum tax (AMT)

• Increase your deductions

• Donate money to a charitable cause

A tax review with a professional is especially important while saving for retirement and after retiring, as taxes on distributions from pre-tax retirement accounts often become significant.

As you review your taxes this spring, keep these five tips in mind: 

Unemployment benefits are taxable. 

Unemployment benefits are taxable income by the IRS and in almost every state. If you received benefits, you may receive a 1099 form showing your benefits income by year-end. Since most states don’t withhold taxes from unemployment payments, you may owe taxes. However, some states don’t tax unemployment benefits—consult a tax professional to confirm your state’s rules.

The home office deduction may not apply to you. 

If you work from home, you may assume you qualify for the home deduction. Unfortunately, work-related expenses are not eligible for deduction if you’re an employee on an employer’s payroll. 

Required Minimum Distributions (RMDs) require special attention. 

Under The SECURE Act, your first RMD starts when you turn age 73, which is later than in previous years. The RMD rule generally applies to the age of the original owner of a traditional IRA, SIMPLE IRA, SEP IRA, a 401(k) or 403(b). Roth IRAs do not have RMDs.

RMD tables have changed.

RMD tables were updated in 2022 to reflect longer life expectancies. These changes impact the amount you’re required to withdraw:

• RMDs are now at a lesser percentage.

• RMD amounts are smaller in order to extend the balance over a longer time period.

• A smaller RMD equals fewer taxes to pay.

• More money remaining in retirement savings accounts means more opportunities for tax-deferred accumulation through reinvesting.

Charitable deductions may save you money. 

To deduct charitable contributions, taxpayers must itemize deductions using Schedule A. Additionally, taxpayers can only claim charitable contribution deductions for cash contributions to public charities and operating foundations up to 60% of their adjusted gross income (AGI).

If you have questions when filing your taxes, consult a tax professional to help ensure you’re not taking deductions you aren’t qualified to take. 

Seek professional advice. Filing taxes can be complicated, especially when navigating deductions or updated regulations. A tax professional can help ensure accuracy, compliance and potential savings.

HELPFUL TAX RESOURCES

Senior Tax Advisory: For personalized assistance, call 719-596-4844.

AARP Tax-Aide: This program provides free tax help, especially to those 60 and older. Volunteers are trained, certified and specialize in questions about pensions and retirement-related issues. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP.org/money/taxes/aarp_taxaide. Make an appointment early; slots fill up fast!

Westside Community Center: Mondays and Tuesdays, February 3-April 15. Call 719-360-3810.

Library 21c: Tuesdays, Wednesdays and Thursdays, February 4-April 10. Call 719-235-6757. (For a complete list of tax preparation services at PPLD locations or more information about filing your 2024 tax return, visit PPLD.org/taxes.)  

Volunteer Income Tax Assistance (VITA): Free tax help and electronic filing for taxpayers earning $64,000 or less. Call 719-632-1543.

Tax Help Colorado: IRS-certified accounting students and volunteers provide free and secure preparation and e-filing for households earning less than $64,000.

Pikes Peak State College: Open Saturdays, February 1-March 22. Schedule at TaxHelpCO.as.me.