9 Easy Ways to Reduce Your Tax Bill Series - Tax Tip #4

Over the next weeks we are going to provide you 9 easy ways to reduce your tax liability - 2016 Edition. Every Monday and Wednesday we will be posting a new tip, so stay tuned!

Tax Tip #4

It is not uncommon for some taxpayers to not be in a tax bracket at all, because they have money in tax-free or tax-deferred vehicles, collect Social Security, and have low fixed expenses. Yet those people often still have some IRA monies. People under the age of 70 not required to take their RMDs are allowed to leave money in IRAs and simply enjoy being at the zero bracket.

Those people, however, often could have taken hundreds, even thousands of dollars out of their IRAs or deferred accounts and continued to pay zero tax. If you're working with a proactive financial advisor, they may suggest a “what if” tax return in the month of December to determine how much actual income you are going to be reporting. If there are a few hundred dollars or more left that you could earn and still pay zero tax, it makes sense to take those dollars from IRA and either rolls them into a Roth IRA, or simply re-categorize those assets, expose them to the possibility of taxation, avoid paying the tax, and restore them in any non-IRA.