A common type of investment is for an individual to receive the interest from an account while the principal remains untouched.
Miami, FL – When people who have investments are preparing to file their taxes, they should start to gather certain pieces of information. This is helpful to ensure that they are sending the right info to the IRS, and civil and criminal penalties can be avoided by following the tax rules related to investments. For those who have substantial investments as sources of income, lawyers should be retained to give advice regarding how to report this income and file properly. Here are a few broad areas of concern for those who have investments during tax time.
Selling assets and the capital gains tax
In a year where investments are sold, the profits may be subject to a capital gains tax. Items that are commonly subject to this type of tax include real estate and land, stocks, and business interests or assets. Miami tax lawyers give advice regarding how to keep capital gains taxes manageable, as things like losses from other sales that did not net a profit can help offset the capital gains tax. The capital gains tax also varies depending on how long the asset was held by the individual before it was sold.
Savings and retirement accounts
Many people start to put money into their 401(k) or an IRA while they are working. The money is not taxed when it is put into the account in most cases, and if it stays in the account and accrues interest this will not be taxed. However, money that is withdrawn from these kinds of investments will need to be reported as income to the IRS. For most people, it is best to not touch these kinds of investments, as there can be both taxes and penalties depending on when and how the money is taken out. Florida tax lawyers may advise anyone who needs assistance with their retirement accounts how to avoid additional taxes and fees.
Accounts that generate interest
A common type of investment is for an individual to receive the interest from an account while the principal remains untouched. However, interest withdrawn in this manner is still considered taxable by the IRS. Tax lawyers can help with bonds or accounts that pay out interest, and they can give more specific guidance based on the individual’s financial and tax concerns.
Trusts and other forms of estate planning
Estate planning lawyers are able to help people who receive income from a trust. These are versatile legal instruments that can pay out income to individuals and charitable causes, and a trust can have a vastly different purpose or tax situation depending on how it was initially set up.
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