| Test Your Human Resources Knowledge | ||
|
| Labor Law Journal Submissions | ||
|
| Labor Arbitrators' Awards and Biographies | ||
5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Young taxpayers are significantly less likely to take advantage of tax-related benefits, are most likely not to know whether they are eligible to participate in benefit plans, and nearly one in five rate their employers as terrible in providing information about tax-advantaged planning, according to findings from a nationwide CCH CompleteTax survey.
"You generally can't avoid taxes, but there are some ways you can reduce them without a lot of pain. Unfortunately, taxpayers are still not as informed as they should be or participating as much as they could be to realize these tax savings," said David Bergstein, CPA, a tax analyst for CCH CompleteTax.
The survey of 1,290 U.S. adult taxpayers, commissioned by CCH and conducted by Harris Interactive, found that many taxpayers are not taking full advantage of basic tax-saving strategies and those 18-24 years of age are the least likely to be doing so. The biggest jump in usage of tax-advantaged programs occurs between the age groups of 18-24 and 25-34, with the percentage of individuals contributing to a medical flexible spending account (FSA) or 401(k) plan more than doubling between these age groups, and the percentage contributing to an individual retirement account (IRA) increasing 10 percentage points. The survey also found that 14 percent of all adult taxpayers are currently not saving for retirement.
Among specific survey findings:
On average, 21 percent of taxpayers participated in a medical FSA in 2006, with 7 percent putting in the maximum amount allowed. However, among young taxpayers, those 18-24 years of age, only 10 percent participated in a company-sponsored medical FSA. Just 4 percent of young taxpayers are putting in the maximum allowed. An additional 11 percent of young taxpayers, however, are uncertain whether their company offers a medical FSA.
Overall, more than one-half of all taxpayers (56 percent) contributed to a company-sponsored retirement plan, including a 401(k), 457, 403(b) or SEP-IRA plan. This includes 14 percent of taxpayers that reported contributing fully in 2006 and 23 percent contributing at least up to the amount needed to make their employer reach their maximum contribution level under the plan. Young taxpayers were the least likely to participate in these retirement plans, with only 28 percent saying they do so, including just 4 percent that reported contributing fully and 16 percent contributing up to the amount needed to make their employer contribute the maximum under the plan.
While 3 in 10 taxpayers reported they have or would be contributing to a 2006 tax-advantaged traditional or Roth IRA, only 19 percent of young taxpayers reported that they are funding a 2006 tax-advantaged IRA. The majority of young taxpayers (57 percent) do not even know if they qualify for a tax-advantaged IRA.
It is not surprising, as a result, that young taxpayers don't think their employers are doing a good job at keeping them informed on topics such as retirement planning. Overall, 23 percent of taxpayers rated their companies as doing an excellent or very good job keeping them informed. However, only 15 percent of young taxpayers felt this way, and only 1 percent of young taxpayers indicated their employer did an excellent job, while 19 percent said their employer did a terrible job.
"Young people may need to take more initiative to become more tax-savvy consumers. Employers also need to consider if they are doing enough. For example, are they communicating in the ways most receptive to young employees," said Bergstein. "If young workers are not hearing the message, no matter how good it is, they don't have the information they need to make informed choices."
Bergstein outlined a few steps that taxpayers of all ages should consider:
Make a commitment to become a more informed taxpayer and don't be shy in asking your employer if you have questions on benefits. Add up how much you paid in income taxes for the year and make time to find out what tax saving programs you may qualify for. For example, if you are in the 25-percent tax bracket, you may be able to save as much as $125 in taxes by just contributing $500 to an IRA or 401(k).
Participate in your employer's medical FSA, if available. Even if you conservatively estimate your medical expenses, why not pay them with pre-tax dollars through your FSA versus after-tax dollars.
Contribute as much as you can to your 401(k) and try to fund at least up to the amount needed to get your employer to contribute the maximum amount they have committed to contribute under your plan.
Start being tax-savvy now. If you've not yet filed your tax return, you still have time to contribute to an IRA for 2006. Take at least some of your expected tax refund and have it start working for your retirement.
"In general, people need to get in the habit of saving more and saving when they are younger. You have older taxpayers now using the catchup contributions. This lets those individuals 50 and older save more, but if you start saving earlier it could mean getting your employer to pitch in more through your 401(k) or realizing a lot more of your savings growing in tax-advantaged accounts," said Bergstein.
For more information on this and related topics, consult the CCH Pension Plan Guide.
Visit our News Library to read more news stories.
©2005-2024 CCH Incorporated or its affiliates
