Federal 1040

TRAK's Paycheck Federal 1040 calculator provides a method for increased deferrals to a qualified plan without any change in take home pay. It illustrates money moving from an anticipated federal 1040 return to the qualified plan without any change in take home pay. This allows:

1.Satisfying or reducing a possible shortfall in retirement.

2.Increase in sales.

Why Use the 1040 Refund for Retirement Planning

There are several reasons a client may want to reduce (or eliminate) their 1040 refund:

1.The federal government does not provide any interest on the money, making it the equivalent of a free loan.

2.Many retirement plans have hardship clauses that allow access to funds in an emergency.

3.Often when people receive their federal refund they do not invest the money--this provides the opportunity to invest some or all of the money into their retirement.

How it Works

The Federal 1040 calculator illustrates how to increase deferrals by:

1.Increasing the number of withholding allowances being claimed (prior to 2020) or additional deductions taken (2020 and beyond); the federal return is then decreased.

2.The increase in pay is then reduced to the original value by increasing the qualified plan contributions.

Sales Note: Before moving to the 1040 calculator, have the client commit to a salary reduction. The 1040 calculator can be used to increase this reduction by moving their federal 1040 refund to their qualified plan.

Additional Features

1.Determine what can be done to maximize voluntary retirement deposits at any date through the end of the year.

2.Change any paycheck variable and instantly see the effects on the paycheck and projected Federal 1040 calculations.

3.Evaluate a client's tax bracket information for better strategic planning of Roth contributions.

4.Calculate balloon contributions for the balance of the year, or level TSA contributions for the entire year.

Note:A spouse's paycheck, when relevant, should be included in the illustration. Click here for directions to add a spouse's paycheck.

Each section is discussed below

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Frequently Asked Questions