Retiring? Your tax return will look different

The transition into retirement comes with changes, such as W-2 income terminating, Medicare benefits starting and new potential sources of income arriving: Social Security and pension income and, after age 72, required minimum distributions from tax-deferred accounts — or perhaps you sold a business or received an inheritance.

In my decades of experience working with clients and speaking with readers of my columns, I can share what I see.

One approach is to wait until the first post-retirement tax return is prepared, by your tax adviser or you, if you do your own taxes. Another is to anticipate your post-retirement tax return to see if any actions need to be taken before the tax year closes.

One reason to do the latter is to see if your tax bracket will be affected. See IRS.gov (tinyurl.com/5up592u8) for the marginal tax rates for the 2022 tax year (ranging from 10% for those married couples filing jointly with income of $20,550 or less, to the top rate of 37% for married couples filing jointly with income over $647,850).

The role of an accountant will depend on the complexity of your transition into retirement, especially if you sold an important asset or wished to set up a charitable foundation.

Ideally, the accountant will use your current tax return as a starting point. Then, he or she will create a hypothetical tax return with new assumptions reflecting new income and expense numbers.

You can also do this on your own if you prepare your own taxes. Run two or three “what-if ” scenarios using different assumptions that will tie to your particular situation.

How do you find the ideal certified public accountant? That was the question asked by reader S.N., who is a few years away from starting her RMDs; most of her assets are held in tax-deferred 401(k)s and traditional IRAs.

When doing your search, you’ll want to find out how much of the person’s experience is with individuals as opposed to corporations and partnerships. The right CPA will have experience with individual taxes and estates and trusts.

One credential that will help narrow the field is the CPA/PFS. PFS stands for Personal Financial Specialist. This is a credential earned by CPAs after meeting education, experience and examination requirements. See the AICPA’s PFS Credential Handbook at tinyurl.com/fuf5axwj.

By the way, the handbook distinguishes financial planners: “All financial planners are not created equal. The AICPA’s Personal Financial Specialist (PFS) credential is granted exclusively to CPAs with the powerful combination of extensive tax expertise and comprehensive knowledge of financial planning. This knowledge is critical for obtaining the most valuable, objective advice possible. All areas of personal financial planning — including estate, retirement, investments and insurance — have tax implications, and only CPA/ PFS professionals have the experience, ethics and expertise to get the job done right.”

If you want to find a CPA/PFS in your area, enter “CPA PFS (your state/ city)” in a search engine.

Once you’ve settled on a few names, you’ll want to interview them to get an understanding of how they will work with you considering your unique financial situation.

Finally, if you have substantial ($5 million or more) tax-deferred monies (401(k)s, IRAs, etc.), you would go further by bringing in national-level expertise to work with your primary CPA.

One such expert is Robert Keebler, CPA/PFS (Keebler & Associates, LLP — tinyurl.com/ykwbk68u).

I know of Keebler through his national presentations, books and articles on retirement distribution planning and estate planning.

Email me (readers@juliejason.com) if you want to talk more about this topic. Please include your state.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2021 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.