A taxpayer's mental illness kept him from understanding how to proceed when his former bank decided to close his accounts and distribute all of his IRA funds. After his death, the widow realized she had unintentionally deposited the IRA funds into a non-IRA account. She filed a Private Letter Ruling (PLR) with IRS to rectify the issue. What did IRS decide?
Victims of severe storms and flooding that started on August 11, 2014 in parts of Michigan may qualify for tax relief from the Internal Revenue Service. On September 26, the IRS issued News Release MI-2014-21, which extended certain deadlines for individuals and businesses affected by those storms. Read on to see if you are affected by these extensions.
The IRS website includes several valuable free employer retirement plan resources. One example is their newsletter Retirement News for Employers. There is a section of this specific newsletter that examines starting an employer plan. Read on for more details on this newsletter and other free IRS resources.
Since the release of IRS Notice 2014-54 on September 18, 2014, there has been some confusion over whether the rules in that Notice apply to converting IRA funds to a Roth IRA. Notice 2014-54 provides favorable guidance for people with after-tax money in their company retirement plan, such as a 401(k). As a result of the Notice, if you have after-tax funds (basis) in your company plan, you may be able to convert some of your retirement savings to a Roth IRA tax-free.
In the wake of IRS Notice 2014-54, this question is coming up a lot. Can you roll only after-tax 401(k) funds to a Roth IRA? The answer is that you are NOT limited to moving only after-tax employer plan funds to a Roth IRA.
Most people are familiar with the basic rules for the pre-tax salary deferrals and employer contributions that are the most frequent types of money found in 401(k) and similar plans. Few, however, are aware of the rules for after-tax contributions to the “traditional side” of such plans and the unique rules and planning opportunities that can present themselves. That’s begun to change over the last week, however, since the release of IRS Notice 2014-54, which provided exceptionally favorable guidance for people with after-tax money in their 401(k) and similar plans.
Moments ago the IRS released new guidance – IRS Notice 2014-54 – regarding distributions from company retirement plans when there are both pre and post-tax money in those accounts. For years now, one question has plagued both plan participants and financial advisors alike… “If someone has a 401(k) with pre and post-tax money, can they take a distribution and roll (convert) just the post-tax money to a Roth IRA tax-free, while rolling the remaining pre-tax money over to a traditional IRA?” What's the answer now?
An advisor had a client who had missed part of her required minimum distribution (RMD). No big deal. This happens – frequently. To fix it, you take the RMD that was missed and you file IRS Form 5329 with the tax return. Form 5329 has you calculate the penalty – 50% of what was not taken. However, IRS can waive this penalty for good cause. The instructions for the form tell you how to do this, although they are a bit confusing. Then you attach a letter explaining what happened and requesting the waiver of the penalty. Apparently the tax preparer did not read the instructions and the penalty was included in the tax due on the client’s return. She did not pay the penalty portion of the tax due because she requested a waiver of the penalty. Now comes the fun part.
A recent IRS private letter ruling (PLR) showcased what can happen when a company retirement plan is terminated, and a common mistake that can occur when paying out those funds to employees or ex-employees. When a company retirement plan such as a 401(k) plan is terminated, the company has to go through a lot of formal steps to terminate it beyond simply deciding to discontinue the plan. These steps as well as what you can do to take action are detailed below.
You're allowed to name anyone as the beneficiary of your IRA. You’re also allowed to name a non-person as your IRA beneficiary. Examples of non-persons would include charities, a trust, or your estate. It is generally not a good move to name your estate as your IRA beneficiary.When you die, your estate includes the property that you owned at the time you died. It’s a legal entity that’s created after you die. Your executor must then pay your expenses and liabilities and distribute the balance according to your will.
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