5 Tax Prep To-Dos as You Hit Retirement

The complex task of preparing taxes is a priority for many people this time of year. Even if you plan to let a pro take on your taxes, it’s a good idea to brush up on the basics.

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From the shock of the first FICA-dented paycheck to the last bonus-enhanced deposit before retirement, there are many years of tax filing that happen during one’s career. While the popularity of DIY tax software has made tax preparation less intimidating for some, you still may not have cracked all the nuances of the complex tax code.

Even more, transitioning from a stream of regular income to Social Security and IRA withdrawals can bring up specific tax issues. So as you head into retirement, it may be a good time to brush up on tax policy to see if you can benefit from these tax-filing basics:

1. Follow the Law.

It may seem tough to keep track of tax law changes, but there are resources to help you stay up to date. Plus, it's always a good idea to be aware of changes that could become increasingly important the closer you get to retirement age.

This includes changes to catch-up contributions. For instance, you can earn a little more money and still contribute to a Roth IRA in 2017. The point is, ignoring change could mean you miss out on a tax-favorable, last-minute boost to your retirement nest.

2. Embrace Status Change.

When you turn 65 the way you file taxes changes. You'll be eligible for certain credits and deductions, and you'll also be able to take a higher standard deduction. However, certain credits or deductions will no longer apply to you after you reach the official "retirement age."

In general, for tax purposes, a "retiree" is someone who has finished his or her career or full-time work. A "senior," on the other hand, is someone who is 65 years of age or older in the year he or she is filing taxes. In some cases, it may make sense to consider estimated quarterly taxes once you've hit retirement.

3. Stockpile Your Resources.

The Internal Revenue Service (IRS) dedicates a decent chunk of its web presence to helping retirees and seniors navigate taxes. They're prepared to answer questions about life events that may have tax consequences for older people, including retirement. There are specific rules around collecting pensions or annuity income, IRAs, civil service or military benefits, and more.

Plus, the IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly offers free tax help for filers older than 60 years of age. Since the IRS is the source for policy and enforcement, it's a great place to start. The turnaround for help can be lengthy depending on the time of year, so you may want to plan ahead.

At the very least, the IRS site can be a source to help generate questions you might want to ask your tax preparer (even if that's you). There are also not-for-profit accounting and tax-prep organizations that are rich resources, including Tax Help.

4. Reinterview the Pro.

It may seem awkward to look at your accountant in a new light after a lengthy relationship, but he or she needs to be ready to transition your tax needs toward retirement, too. Communicate effectively about your retirement timeline and your concerns.

Make sure the accountant you work with services clients in similar circumstances to your own. And, if you're reaching out to a new professional you might ask yourself how complex your scenario will be to administer. If your tax return will be complex, consider an enrolled agent—a tax professional who is licensed by the IRS. Enrolled agents must pass a stringent three-part exam and complete 72 hours of IRS-approved continuing education every three years. If your retirement involves a move, you may want to check with your state's CPA society, the Accreditation Council for Accountancy and Taxation or the National Association of Enrolled Agents.

5. Tighten Your Defenses.

The IRS handles much of its business the old-fashioned way—and that can be a good thing. Normally, contact from the IRS comes via snail mail. Agents are not going to ask you to send money immediately over the phone with a wire transfer or credit card.

To avoid scams, never give out your Social Security number, credit card number, or personal information to anyone who calls you on the phone. If the person on the other end lobs threats your way of arrest, deportation, or suspension of a driver's license, that's your proof it's not a legitimate call.

This article is an update of the original 5 Tax Prep To-Dos as You Hit Retirement published on November 3, 2015.


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