If a business owner is considering starting a retirement plan for himself and his employees, he may want to consider an employer-sponsored IRA. While employer-sponsored IRAs are not very well known, even to many tax pros and CPAs, they offer some unique advantages from other employer retirement plans.
If you inherit the IRA of an individual who has a required distribution for the year, you – as the beneficiary – must take any remaining required minimum distribution (RMD). Here is a situation that deals with this issue. John and Sue were both 75 years old last year. They both took their RMDs for the year. John died early in December. Sue was his beneficiary. She rolled his IRA into her own IRA in January. The question was – “What is Sue’s RMD for this year?"
With no state income tax to worry about, Texas residents don't have to worry about the state tax impacts of making IRA contributions. Since there is no state income tax, a deduction for making an IRA contribution is irrelevant. Plus, when IRA distributions are made in the future, Texas residents will only owe federal income tax on those distributions (assuming the Texas' tax laws remain the same). If you happen to live in one of the other 43 states, figuring out the state income tax consequences of making an IRA contribution is likely to be a bit more taxing (pun definitely intended).
If you are the beneficiary of a deceased IRA owner, you have to begin taking required minimum distributions (RMDs). In some cases, there is an RMD you must take in the year the IRA owner dies. The required beginning date (RBD) for the IRA owner to have started taking their RMD is April 1 after the year they turned age 70 ½. If the IRA owner died before their RBD, there is no year of death RMD that you need to take. However, if the IRA owner died after their RBD, there may be an RMD that you as their beneficiary have to take that year.
Basically, when the IRA owner dies on or after that
A Roth conversion could cost you more in 2013. That's because of several new and/or increased taxes in play for this year. The top income tax bracket is 39.6% for individuals married filing jointly with taxable income in excess of $450,000. A large Roth conversion could easily push an individual into the highest income tax bracket. When adjusted gross income for our married couple exceeds $300,000, personal exemptions and itemized deductions begin to phase out. And, when modified adjusted gross income exceeds $250,000, net investment income for our married couple becomes subject to the 3.8% surtax. So you can see how a Roth conversion could cost an individual more in taxes this year.
This week's Slott Report Mailbag includes questions on the always-complicated Roth IRA 5-year rules and the pro-rata rule. As you can see, this is just the tip of the iceberg when it comes to IRA planning rules.
Ed Slott and Company IRA Technical Consultant Jeffrey Levine discusses 3 financial and retirement planning keys you should discuss with your impending spouse as your wedding nears. Jeffrey talked about these keys in the IRAtv YouTube video below.
The IRS issued a News Release (IR-2013-43) that gives a three-month tax filing and payment extension to Boston area taxpayers and others affected by the bombs at the Boston Marathon on Monday, April 15th. The new deadline is July 15, 2013.
For IRA distribution purposes, all IRAs (except Roth IRAs) are considered one big giant IRA. It doesn’t matter if you have one IRA that was rolled over from a former employer, and one SEP IRA with your current employer, and one contributory IRA where you put annual contributions, and one after-tax IRA where you put contributions for which you do not take a deduction. All four IRAs will be considered one IRA any time you take a distribution.
Let me start by saying we here at Ed Slott and Company were horrified and deeply saddened by the deadly bombings at the Boston Marathon on Monday. Our hearts go out to the victims and their families, and we salute the first responders and brave citizens who so courageously rushed to the aide of so many who were in need, no doubt saving countless lives.
