Started a 401k This Year? Here’s What You Need To Know Come Tax Time

What You Need to Know About Your 401(k) Come Tax Time | Mazuma USA | Accounting and Bookkeeping for Small Business

For many, landing a job right out of college is a necessity. There are student loans to pay back, rent/mortagage  not to mention the general costs of living. Most need as many dollars in their pocket as possible to afford living, so saving for retirement often gets put off. We get it, bills are bills.  The one thing we don’t think about is retirement. But a 401(k) is a great way to invest right out the gate (or whenever you decide to start one really). Read on to find out why investing in a 401(k) is a smart move and how it brings more perks than just money for retirement.

Why Investing in a 401(k) is a Good Idea

  • your contributions go in tax free – meaning you’re getting interest on every penny you put in rather than the amount minus tax
  • because your contributions go in pre-tax, that means your taxable income right now is lower – that’s a win for sure!
  • Many employers match your contribution – which means you get free money! Check with your HR department to find out the details so you can take advantage of this benefit if it’s offered.
  • Saver’s Credit at tax time – you may or may not qualify for this one, but it’s worth checking into. With the Saver’s Credit,  you could get up to $1000 credit if you’re single or $2000 if you’re married filing jointly.

What You Need for Tax Filing

With all the perks, you’d think the downside of the 401(k) would happen come tax time – but there’s no additional paperwork for you. Your W2 reflects your 401(k) contributions. If you want to see how much you’re saving now, take a look at your W2 and you’ll see how much your taxable income is lowered by contributing to your 401(k).

 

Have questions about filing taxes? Want to know what other forms of investing would work for your current financial status. We’d love to chat with you – contact us here. 

 

What You Need to Know About Your 401(k) Come Tax Time | Mazuma USA | Accounting and Bookkeeping for Small Business

Ben Sutton is the founder of Mazuma USA, an accounting firm providing tax, bookkeeping and payroll services to small businesses. Since founding Mazuma, Ben has established himself as an expert in the small business world. He’s still driven by that same desire to provide accounting help to all small businesses – from photographers, bloggers and creatives to lawyers, doctors, and dentists, everyone needs affordable accounting help. Ben is a Certified Public Accountant, and a member of the American Institute of Certified Public Accountants. But Ben considers his greatest achievement and credential to be his happy wife and four children.

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...