Archive for Retirement

It’s Not Too Late To Make A 2014 IRA Contribution

If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2014, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2014. Otherwise, the trustee may report the contribution as being for 2015 when they get your funds.

Generally, you can contribute up to $5,500 of your earnings for tax year 2014 (up to $6,500 if you are age 50 or older in 2014). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts. Read More

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6 Key Points To Know About Early Retirement Distributions

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1. Early Withdrawals.  An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2. Additional Tax.  If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3. Nontaxable Withdrawals.  The added 10 percent tax does not apply to nontaxable Read More

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Offbeat Questions Are The “Spices of Life” Regarding Simplified Employee Pension (SEP)

Can You Establish a SEP Plan if you are a Sole Proprietor? What if that Sole Proprietorship Had Historically Passive Income?

Regardless of their nature or topic matter, offbeat questions are one of the spices of life. When it comes to the realm of taxation generally speaking the answers frequently distill down to – it depends.

These two questions were asked of me on my last trip to New York City and I couldn’t restrain a spontaneous sarcastic guffaw as we were in the middle of the Museum of Modern Art attempting to comprehend the Matisse Cut-Out Exhibit and I was day dreaming that my 10 year old daughter may perhaps be an artistic genius. Read More

Written by | Posted in Individual • Retirement • Tax Planning

Unrelated Business Taxable Income For An IRA

In a previous article, we discussed the concept of Unrelated Business Taxable Income (UBTI) as it relates to non-profit organizations. If you have a self-directed IRA, you may be surprised to know that UBTI may also apply to your IRA. An IRA is a tax-exempt entity, under IRS rules. Note that the IRA itself is the tax exempt entity and the tax would be paid by the IRA, not the owner of the IRA.

The basic rules for UBTI in an IRA are pretty much the same as for any non-profit organization, but there are a couple of issues that may be encountered more commonly with an IRA. If a non-profit entity has UBTI, it will be subject to tax on that income at the applicable corporate rates. The purpose of this is to level the playing field for for-profit entities that must pay tax on their income. Read More

Written by | Posted in Non-Profit Tax • Retirement

2015 Pension Plan Limitations

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

According to IRS Newswire, on October 23, 2014, Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Read More

Written by | Posted in Individual • IRS • Retirement • Small Business

IRS Clarifies Application of One-Per-Year Limit On IRA Rollovers, Allows Owners of Multiple IRA’s A Fresh Start In 2015

If you have an IRA beware of this new rule that limits the number of IRA Rollovers that are not “trustee to trustee” to one per year.

When you receive a distribution from a traditional IRA or your employer’s plan, you would normally report it as income unless you rollover that distribution to another IRA no later than 60 days after the day you receive the distribution from your traditional IRA or your employer’s plan. In the absence of a waiver or an extension, amounts not rolled over within the 60-day period do not qualify for tax-free rollover treatment. You must treat them as a taxable distribution from either your IRA or your employer’s plan. These amounts are taxable in the year distributed, even if the 60-day period expires in the next year. You may also have to pay a 10% additional tax on early distributions as discussed later under Early Distributions. Read More

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“MyRA”… A New Retirement Buzz Word Or A Dud?

President Obama signed a presidential memorandum in January of 2014 directing the Dept of Treasury to create “myRA”. The memorandum states myRA to be a “a new simple, safe and affordable “starter” retirement savings account that will be initially offered through employers and will ultimately help low and moderate income Americans save for retirement”.

The proposal is that beginning in late 2014, with this retirement savings account individuals will be able to open accounts and begin contributing to them every payday. myRAs will be initially offered through employers, balances will never go down, and there will be no fees. myRAs will hold a new retirement savings bond that will be backed by the U.S. Treasury. Read More

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IRS Increases Contribution Amounts for Retirement Plans

The IRS announced in IR 2014-99 increases to retirement plan contributions.

Highlights include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.

• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000. Read More

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IRS Simplifies Reporting of Canadian Retirement Plans (RRSP’s); Eliminates Form 8891

On October 7, 2014, the IRS made it easier for taxpayers who hold interests in certain popular Canadian retirement plans to get favorable U.S. tax treatment. Rev. Proc. 2014-55. As a result of the change, many Americans and Canadians with either registered retirement savings plans (RRSP’s) and registered retirement income funds (RRIF’s) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRA’s) and 401(k) plans. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.

In general, U.S. citizens and resident aliens will qualify for this special treatment as long as they have filed and continue to file U.S. income tax returns for any year they held an Read More

Written by | Posted in Canada • FBAR • IRS • Retirement

IRS Simplifies RRSP Treaty Benefit Election For U.S. Citizens

The IRS recently released a new Revenue Procedure regarding U.S. citizens and residents holding Canadian Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Fund (RRIF). The IRS has simplified some of the reporting requirements for these taxpayers.

In the past, filing a 1040 tax return for a taxpayer who held RRSPs required the filing of form 8891 for each and every RRSP and RRIF account owned by the taxpayer. This form reported the December 31st balance of these accounts and claimed treaty benefit, Article XVIII(7), which is enshrined in the U.S.-Canada Income Tax Convention (herein referred to as treaty) whereby a taxpayer could defer taxation on the earnings within these accounts until distribution. This treatment was intended to give similar treatment to RRSP that was Read More

Written by | Posted in Canada • FBAR • International • IRS • Retirement
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