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Tag Archive for 401K

Deferred Compensation, Part VII: Profit-Sharing

Adding a profit-sharing component to your 401(k) plan can increase your contributions while also motivating employees.  All of the previously-discussed rules apply: you can’t have a top-heavy plan, you can’t discriminate in favor of certain employees, etc…

Here’s a general description of what’s involved from the code:

A profit-sharing plan is a plan established and maintained by an employer to provide for the participation in his profits by his employees or their beneficiaries. Read more

Five Tax Tips For Job Changers

Henry Lock, Tax Advisor, Auburn Hills, MN, TaxConnections

There are a lot of new things to get used to when you change jobs, from new responsibilities to adjusting to a new company culture. One thing you may not have considered are the tax issues created when you change jobs. Here are tips to reduce any potential tax problems related to making a job change this coming year.

Don’t forget about in-between pay. It is easy to forget to account for pay received while you’re between jobs. This includes severance and accrued vacation or sick pay from your former employer. It may also include unemployment benefits. All are taxable but may not have had taxes withheld, causing a surprise at tax time. Read more

Non-Qualified Deferred Compensation: Timing and Constructive Receipt Issues

It’s doubtful that anybody in the Financial Services industry is unaware of qualified retirement plans such as 401(k)s and IRAs.  Knowledge of them is required to pass licensing exams and every firm includes them in sales literature. Non-qualified plans (NQDC), however, are less well-known, largely because they are more complex and appeal to a far smaller group of potential buyers.  Although their application is narrower, in the right circumstances NQDC’s can provide clients with tremendous advantages.

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It’s Time For Year-End Tax Planning

For the past few years, year-end tax planning has been challenging due to the lateness of action by Congress. This year is no different because of uncertainty over whether Congress will extend any of the many expired or expiring tax provisions. However, regardless of what Congress does later this year, solid tax savings can still be realized by taking advantage of tax breaks that are still on the books for 2015. For individuals and small businesses, these include:

• Capital Gains and Losses – You can employ several strategies to suit your particular tax circumstances. If your income is low this year and your tax bracket is 15% or lower, you can take advantage of the zero percent capital gains bracket benefit, resulting in no tax for part or all of your long-term gains. Others, affected by the market downturn earlier this year, should review their portfolio with an eye to offsetting gains Read more

Transfer of Cross-Border Pensions To Your RRSP

Below is a CRA confirmation of this.

Numerous immigrants to Canada or those residing in Canada but have worked for say U.S. employers have entitlements to U.S. pensions such as 401K plans and in some circumstances they have U.S. IRAs. The Income Tax Act has provisions to allow transfers including a claim for any U.S. withholding tax or for applicable early withdrawal penalties.

Examination of both the U.S. and Canadian tax provisions should be dealt with before any transfer takes place to ensure the rollover is available in Canada.


TRANSFER OF SWISS PENSION TO AN RRSP Read more

QLACs And RMDs: Need a Break On Your Required Minimum Distribution? Read This!

I had a number of clients hit the magic RMD age this past year. RMD is an acronym for Required Minimum Distributions, if you are getting close to 70 years of age, you will be hearing that a lot. Even if that magic number is quite a ways down the road for you, this is a post you will want to read & remember.

Read more about RMDs in detail here on my blog post.

For a quick recap about what Required Minimum Distributions are, the Internal Revenue Service (IRS) defines it as “Required Minimum Distributions generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% Read more

IRS Releases Pension Limits For 2016

Saving for retirement is one of the most important things you should do. Even though retirement may seem far away now, that time will eventually arrive and you will want to be prepared for it with adequate savings. Contributing to tax-advantaged retirement plans while you are working is one of the best ways to build up a nest egg for your retirement years. That said, the tax law doesn’t allow unlimited annual contributions to these plans.

If you have been wondering how much you can contribute to your retirement plans in 2016, the IRS has released the inflation-adjusted limits for next year’s contributions. Since inflation has been low this past year (at least according to the government’s calculation), most limits won’t increase over what they were in 2015, but some of the AGI phaseout thresholds that work to reduce allowable contributions will change. Here’s a review of the 2016 numbers: Read more

Don’t Forget Your Retirement!

Even though retirement may be years away, and it may not be the most pressing issue on your mind these days, don’t forget your retirement contributions, especially with generous government incentives involved.

There are a variety of retirement plans available to small businesses that allow the employer and employee a tax-favored way to save for retirement. Contributions made by the owner on his or her own behalf and for employees can be tax-deductible. Furthermore, the earnings on the contributions grow tax-free until the money is distributed from the plan. Here are some retirement plan options:

Simplified Employee Pension Plan (SEP). This plan was designed to avoid the Read more

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

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

Year-end Tax Checkup If You Are Older Than 70.5 Years – Have You Satisfied Your 2014 Required Minimum Distribution?

Do Not Be At Risk for A Major Tax Penalty

Don’t let the hustle and bustle of the holiday season distract you into a hefty tax penalty come April. As the end of a year approaches, many consumers begin taking distributions from many of their retirement accounts-including 401(k) and 403(b) plans, and traditional IRAs-starting in the year they turn 70-and-a-half or the year when they retire, whichever is later. Failure to do so and the amount you should have withdrawn will be taxed at 50%. It’s one of the biggest penalties in the tax code and you would be surprised how many people fall into this trap. Fidelity Investments reports that of the more than 750,000 Fidelity IRA customers who need to take a Required Minimum Distribution (“RMD”) this year, 68% have yet to withdraw enough. Read more

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