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Still working after age 70½? You may not have to begin 401(k) withdrawals

Posted by Admin Posted on Mar 28 2019

If you participate in a qualified retirement plan, such as a 401(k), you must generally begin taking required withdrawals from the plan no later than April 1 of the year after which you turn age 70½. However, there’s an exception that applies to certain plan participants who are still working for the entire year in which they turn 70½.

The basics of RMDs

Required minimum distributions (RMDs) are the amounts you’re legally required to withdraw from your qualified retirement plans and traditional IRAs after reaching age 70½. Essentially, the tax law requires you to tap into your retirement assets — and begin paying taxes on them — whether you want to or not.

Under the tax code, RMDs must begin to be taken from qualified pension, profit sharing and stock bonus plans by a certain date. That date is April 1 of the year following the later of the calendar year in which an employee: Reaches age 70½, or retires from employment with the employer maintaining the plan under the “still working” exception.

Once they begin, RMDs must generally continue each year. The tax penalty for withdrawing less than the RMD amount is 50% of the portion that should have been withdrawn but wasn’t. However, there’s an important exception to the still-working exception. If owner-employees own at least 5% of the company, they must begin taking RMDs from their 401(k)s beginning at 70½, regardless of their work status.

The still-working rule doesn’t apply to distributions from IRAs (including SEPs or SIMPLE IRAs). RMDs from these accounts must begin no later than April 1 of the year following the calendar year such individuals turn age 70½, even if they’re not retired.

The law and regulations don’t state how many hours an employee needs to work in order to postpone 401(k) RMDs. There’s no requirement that he or she work 40 hours a week for the exception to apply. However, the employee must be doing legitimate work and receiving W-2 wages.

For a customized plan

The RMD rules for qualified retirement plans (and IRAs) are complex. With careful planning, you can minimize your taxes and preserve more assets for your heirs. If you’re still working after age 70½, it may be beneficial to delay taking RMDs but there could also be disadvantages. Contact us to customize the optimal plan based on your individual retirement and estate planning goals.

 

How ancient Incan bean counters counted... beans

Posted by Admin Posted on Mar 21 2019

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WHAT'S IN YOUR (VIRTUAL) WALLET?

Posted by Admin Posted on Mar 14 2019

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Americans abroad, living as locals

Posted by Admin Posted on Mar 07 2019

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Turn that frown upside down

Posted by Admin Posted on Mar 01 2019

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Some of your deductions may be smaller (or nonexistent) when you file your 2018 tax return

Posted by Admin Posted on Feb 22 2019

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While the Tax Cuts and Jobs Act reduces most income tax rates and expands some tax breaks, it may cause you to see these five itemized deductions shrink or disappear when you file your 2018 tax return: 1) state and local tax, 2) mortgage interest, 3) home equity debt interest, 4) miscellaneous, and 5) casualty and theft loss. The combination of a much larger standard deduction and smaller itemized deductions may mean that, even if itemizing has typically benefited you, you might now be better off taking the standard deduction. Contact us for details.

Because you believe in second chances

Posted by Admin Posted on Feb 15 2019

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Why you shouldn’t wait to file your 2018 income tax return

Posted by Admin Posted on Feb 07 2019

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The IRS opened the 2018 income tax return filing season on Jan. 28. Consider filing as soon as you can, even if you typically don’t file this early. It can help protect you from tax identity theft, in which a thief files a return using your Social Security number to claim a bogus refund. If you file first, it will be returns filed by any would-be thieves that are rejected by the IRS, not yours. Ot her benefits: You’ll get your refund sooner or, if you owe tax, you’ll know how much you owe sooner so you can be ready to pay it by April 15. Contact us with questions.

Is your nonprofit ready for a raffle?

Posted by Admin Posted on Jan 31 2019

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Raffles are popular fundraisers for not-for-profits. But they’re subject to strict tax rules. State laws on nonprofit-sponsored raffles vary, but you must comply with federal income tax requirements. First, you may owe unrelated business income tax unless your fundraiser is “substantially” staffed by volunteers. Second, raffle winnings must be reported to the IRS when the amount is $600 or more an d at least 300 times the raffle ticket price. Third, you need to withhold income tax from the winnings if the proceeds are more than $5,000. Contact us for details.

Taxpayers, start your engines!

Posted by Admin Posted on Jan 24 2019

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Movin' on up

Posted by Admin Posted on Jan 18 2019

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Charitable donations: Unraveling the mystery of motivation

Posted by Admin Posted on Jan 14 2019

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Americans support charities for a variety of financial, emotional and social reasons, and some of them aren’t so obvious. For example, wealthy donors may be motivated by not only tax and asset protection considerations, but also a desire to limit what they leave to their children to prevent a “burden of wealth.” Younger donors often want to “make a difference,” and donors of all stripes are motiva ted by a desire to make an altruistic impression. These individuals are more likely to give when asked by someone they know or when their gift will be publicized.

How to spend less, much less, in 2019

Posted by Admin Posted on Jan 03 2019

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You may be able to save more for retirement in 2019

Posted by Admin Posted on Dec 28 2018
Retirement plan contribution limits are indexed for inflation, and most have increased for 2019. So you may have opportunities to increase your retirement savings. Limits for 401(k)s, SIMPLEs and IRAs increase by $500, to $19,000, $13,000 and $6,000, respectively. Catch-up contributions (for taxpayers age 50 or older) remain unchanged, however. They’re $6,000, $3,000 and $1,000, respectively. Additional factors may affect how much you’re allowed to contribute. For more on how to make the most of tax-advantaged retirement-saving opportunities in 2019, contact us.
 

FIXED vs ADJUSTABLE RATE MORTGAGES

Posted by Admin Posted on Dec 20 2018

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Celebrate a successful year!

Posted by Admin Posted on Dec 13 2018

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There's still time to reduce your 2018 tax bill

Posted by Admin Posted on Dec 06 2018

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Accounting Day Parties Can Get a Little Crazy

Posted by Admin Posted on Nov 01 2018

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So you've received a letter from the IRS ...

Posted by Admin Posted on Sept 20 2018

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What it takes to be a Woman CPA

Posted by Admin Posted on Jan 22 2018

Welcome to Our Blog!

Posted by Admin Posted on Sept 24 2013
This is the home of our new blog. Check back often for updates!

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