Archives for Tax Planning

Clearing Up Confusion About RMDs

Last month, we posted information about how the SECURE Act has increased the age for required minimum distributions (RMDs) from 70-1/2 to 72 starting this year, 2020. If you turned age 70-1/2 in 2019, your RMDs were required for the 2019 tax year, and WILL BE required for 2020, 2021 and every year from now on. For everyone turning 70-1/2 in 2020, your RMDs will not be required until the year you turn 72, even if you have received notification from your custodian to the contrary. Because the law was passed and became effective within two weeks of passage, automated
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Categories: Retirement and Tax Planning.

5 Things You Need to Know About the SECURE Act

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE) became effective Jan. 1, 2020, and many people have questions about it. Here are the top five things consumers should know.   72 is the new 70½ The SECURE Act raises the age at which retirees must begin taking Required Minimum Distributions from the awkward age of 70-1/2 to an even age 72, allowing for a couple more years of growth before RMDs kick in. NOTE: Anyone who reached age 70-1/2 in 2019 or before is subject to the old rules.   You can keep making contributions to traditional
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Categories: Retirement and Tax Planning.

Congress Looks to Provide More Options for Retirement Savers

While changes to traditional IRAs, RMDs offer some benefits, there are tradeoffs.   Broad proposals are in the works in the retirement savings arena to ease rules on tax-deferred savings vehicles, make it easier for employers to offer 401(k)-type savings plans and also convert balances into annuities for lifetime income. In late May, the House of Representatives overwhelmingly passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE). Key provisions within the SECURE Act offer more flexibility for when distributions would have to be taken out of tax-deferred accounts. On the flip side, the Act takes direct
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Categories: Retirement and Tax Planning.

Are your Social Security benefits taxable?

The answer is: Yes, sometimes. If you don’t have significant income in retirement besides Social Security benefits, then you probably won’t owe taxes on your benefits. But if you have large amounts saved up in tax-deferred vehicles like 401(k)s, you could be in for a surprise later. AGI (Adjusted Gross Income) versus Combined Income. You are probably familiar with what AGI, or adjusted gross income, means. To find it, you take your gross income from wages, self-employed earnings, interest, dividends, required minimum distributions from qualified retirement accounts and other taxable income, like unearned income, that must be reported on tax returns. (Unearned, taxable income can
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Categories: Social Security and Tax Planning.

It’s Tax Season for Your 2018 Returns – Will You Owe More?

This year, the deadline to file your income tax returns is April 15, 2019. As of early February of 2019, Time Magazine1 reported that many Americans who had already filed their 2018 taxes were shocked by their lower refunds this year likely stemming from the “Tax Cuts and Jobs Act” law that passed in December 2017, which significantly overhauled the tax code in the U.S. “The initial batch of tax refunds in the first two weeks of the season declined an average of 8.7% from last year as of Feb. 8, according to a report from the Internal Revenue Service.
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Categories: Tax Planning.

Tax Reform Highlights

Here are some brief updates about the tax bill that was recently passed. Keep in mind that the industry is still working through the ramifications of the legislation; there will be much more in-depth information coming throughout the year.   New Income Tax Rates The tax brackets for individuals have been lowered for everyone except the lowest bracket, until 2026, when they revert back to 2017 rates. (Employees will see the lowered withholding on their February 2018 paychecks.) The bracket income levels will rise each year with inflation, because they are now tied to the chained consumer price index. Over
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Categories: Tax Planning.

Big Tax Refund This Year? You’re Doing It Wrong.

For most taxpayers, getting a big refund feels good. According to the IRS, the average American received a refund of $2,860 in 2016. Awesome! That should cover the summer vacation or make a down payment on a vehicle. But wait, why you are getting this nice windfall? It’s because you gave the government an interest-free loan the previous year! Your paycheck was also about $250 less per month. If you had put that extra cash in a 401(k) and your company matched the contribution, you could have just doubled your money instead. Add in soaring equity markets, and you could
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Categories: Tax Planning.