Tag Archive for IRA

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

Written by | Posted in Retirement

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

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

Written by | Posted in Retirement • Tax Planning • Tax Tips

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

Written by | Posted in Individual • IRS • Tax Tips

Roth Contributions: Limits To Remember

Who was William Victor “Bill” Roth, Jr? He was the legislative sponsor of the Individual Retirement Account plan that now bears his name, he was also famous for his toupee, he supposedly had “the grace of a stick figure”, and most importantly, he had a succession of Saint Bernard dogs throughout his 34 years of politics and it sort of became his trademark.

Besides his obvious love of St. Bernards, he was a lawyer by profession and started his political career in the late 1960s in Delaware. He was elected to the United States House of Representatives and was known to be fiscally conservative. He was the co-author of the Kemp-Roth Tax Cut. The Roth IRA has been in existence since 1998. And the Roth 401(k) since 2006. Read More

Written by | Posted in Individual • Retirement

40% of Big Firm Partners Retiring Within Decade

High Net Wealth Partners Retiring

On April 28, 2014 The American Lawyer published its annual (2014) Big Law report in which it found that 16% of partners in the US’ largest 200 law firms by revenue are 60 years old or older, with at least 8% 65 or older.  These 16% of big firm partners will be retiring over the next five years.  Moreover, right behind this retiring group are 28% more partners that have reached at least 50 years of age.

While these thousands of retiring partners leading up to retirement may have been earning between $750,000 and $3 million annually, most also have lifestyles that correspond to spending this level of income.  These retiring partners are now asking Read More

Written by | Posted in Estate Planning Tax • Individual • Retirement

Investing In A Roth 401(K) And Tax Free Rollovers

Roth 401(K)

Employees should consider making contributions to a Roth 401(K) if their employer allows them to do so. The account is funded by after tax contributions. Since there are no income limitations on making contributions to a Roth 401(K), these provide a good way for high income taxpayers to invest in a Roth IRA without converting a traditional IRA. For 2014, you may contribute up to $17,500 to a Roth 401(K) a traditional 401(K), or a combination of the two. If you are 50 or older, the contribution limit is $23,000 annually If the employer matches the employee contribution, it goes into the traditional 401(K) as a pretax contribution.

Both withdrawals from a Roth IRA and a Roth 401(K) are tax-free if the account has been Read More

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Retirement Plan Recharacterization – Part III

Lessons I’ve Learned

The following are some important lessons I’ve learned in defending (and preparing) tax returns for people who engaged this concept of recharacterization:

1. Generally, both the election to recharacterize and the transfer must take place on or before the due date for filing the tax return for the year for which the contribution or conversion was made to the first IRA.

2. To add even more salt to the water special procedures are available that allow someone who has already filed a timely tax return to recharacterize contributions for up to six months after his or her tax return’s due date exclusive of extensions. Read More

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Saving For Retirement? Get A Credit Out Of It!

The modern day Guru of all-things-financial, the Investing Pundit of the 21st century, Warren Buffet, has said “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” There is truth in this statement for all but especially for those who are in the lower income brackets, or those starting on their career paths, saving a little over time adds up!

So you just got a job or you are one of those who are thinking of starting up your retirement basket, the Internal Revenue Service (IRS) has an incentive for you. It’s called the “Saver’s Credit”. It is available to you if you contribute to a 401K or an IRA.

The credit is worth $2000 to taxpayers filing with the “Married Filing Joint” status and worth Read More

Written by | Posted in Individual • Tax Tips
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