It’s not a good question to be asking, and it’s certainly not the right question to be asking, but one fairly common question asked by both advisors and clients is “How are they going to know?” The “they,” they’re referring to, is the IRS. For those that have ever wondered, here are the answers to seven common “How are they going to know” questions.
This is a reminder that not all 10% early distribution penalty exceptions apply to all retirement plan distributions. Here are the three biggest mistakes that we see.
It is not unusual to inherit an IRA from someone who is not your spouse. Many people inherit an IRA from a parent or a sibling. If this is the case for you, here are six things you will want to know.
1) There Are No Restrictions Preventing a Tax Break
When you defer a portion of your salary into a traditional 401(k), the amount deferred will reduce your taxable income dollar-for-dollar. This is true regardless of how much income you (and your spouse, if applicable) have. In contrast, contributions to a traditional IRA are generally entitled to a tax deduction as well, but if your income is above certain limits and you (and/or your spouse, if applicable) are an active participant in an employer-sponsored retirement plan, then that deduction can be reduced or eliminated. Thus, in some scenarios, a contribution to a traditional IRA won’t help you reduce your current tax bill.
On April 26, 2017, the Trump administration released its highly anticipated tax reform plan. The administration said the goals of the plan include growing the economy, creating jobs and simplifying the tax code. The changes proposed are significant and if passed (and that is a big “if”) could have a major impact on your retirement planning.
In two weeks I had three trusts come across my desk that were named as the beneficiary of the account owner’s IRA. The account owner had now died and the universal question was, “Now what?”
In 2014, the Tax Court in the Bobrow case ruled that the once-per-year rollover rule applies to all of an individual’s IRAs, not to each of their IRA accounts separately. The Court’s surprising ruling conflicted with a long-standing IRS position in earlier editions of IRS Publication 590 and in private letter rulings. Several years have now passed since this ruling, but there is still a lot of confusion out there about the stricter interpretation of the once-per-year rule. Here are 7 things you need to know to know about this rule that has tripped up many taxpayers.
Congratulations! You’ve made it through yet another tax season. By now, you should have either filed your return or an extension. If you did the former, and actually filed your return, a three-year statute of limitations clock has begun to tick. This three-year period is generally the amount of time that the IRS has to examine your return via an audit, though there are some exceptions (such as when fraud is involved, in which case there is no statute of limitations).
Qualified Charitable Distributions (QCDs) are now a permanent part of the tax code. They allow individuals who are at least 70 ½ years old at the time of the transfer to directly transfer IRA funds to a qualifying charity. The individual gets no charitable deduction for these contributed funds, but, they do not have to include the funds in income. It is as if they completely disappear. It’s even better than investing with Bernie Madoff! But wait, there’s more. The QCD transaction can also satisfy a required minimum distribution (RMD) for the year. QCDs are capped at $100,000 per year, per IRA owner.
The 2016 tax-filing deadline is upon us. Are you considering making a 2016 IRA contribution? It’s not too late, but time is quickly running out. Here are some quick words of last minute advice to keep in mind as you make your contribution.
