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Tax Blog
“Taxing” is a word synonymous with “onerous” and “wearing.”  Bond Beebe, Accountants & Advisors, have created a user friendly blog called “It’s Taxing” to inform and educate our clients and business associates on timely topics related to tax, estates, accounting and finance.  We hope our blog answers your questions and alleviates the heavy burden and anxiety related to understanding complicated tax laws and related matters. 

 

IRS Provides Guidance on Annual IRA Rollover Limit

IRS Issued Announcement 2014-32 last week, which provides guidance on the IRA one-rollover-per-year Rule.


Generally, you are not allowed to withdraw money from  an IRA until you reach age 59 1/2. If you do, the cash is subject to a 10%  penalty in addition to tax, making early distributions potentially very costly.


If a distribution from an IRA is  paid directly to you, you can avoid the related tax and penalty as long as you deposit the distribution in an IRA or other retirement plan within 60 days. One key component of this rule is that this type of rollover can only be done once within the same 12-month period.


In the past, IRS took the position that the annual limit applied to each IRA account. Thus, taxpayers with several IRA accounts could roll each one over  in the same 12-month period without penalty if it was properly done within the 60-day period.


However, earlier in 2014, as a result of the Tax Court opinion in “Bobrow v. Commissioner,” the IRS changed its position on this type of rollover. Now the one-rollover-per year rule will apply to each taxpayer, instead of each IRA. In essence, if you own several IRA accounts you will only be able to roll over one account  each year  and still avoid penalties.  Furthermore, if you make more than one IRA rollover in the same year, depositing the funds into another IRA will be considered an excess contribution, which is assessed an additional 6% penalty on top of the initial tax and 10% penalty.

Telephone Scam Warning Issued By IRS

Over the past several months, the IRS has issued several consumer alerts in response to telephone scam artists claiming to represent IRS agents.  Some of these callers use sophisticated and threatening tactics in an effort to persuade you to provide sensitive information.  While receiving one of these phone calls can be frightening, it is important to remember a few things about how these intimidation tactics differ from common IRS procedures.


The IRS will never call to demand immediate payment of taxes, nor will they call without having first mailed you a bill.  The IRS will never require you to use a specific method of payment (such as a prepaid debit card), nor will they request credit or debit card information over the phone.  Last, they will never threaten to utilize local law enforcement in order to persuade you to provide information.


If you have received a phone call from someone claiming to represent the IRS and using any of the above tactics, there are two ways to report the incident.  You may contact the Treasury Inspector General for Tax Administration at 1-800-366-4484 or at www.tigta.gov.  You can also file a complaint with the Federal Trade Commission using the FTC Complaint Assistant.  Choose “Other” and then “Imposter Scams,” and include the words “IRS Telephone Scam” in your complaint.


If you believe the phone call may be legitimate, it is important that you contact your tax advisor directly or the IRS at 1-800-829-1040 before providing any sensitive information over the phone.


The complete IRS consumer alert containing this information can be found here, and additional guidance on characteristics of these phone scams can be found here.

IRS Announces New Provisions Affecting Estate Planning

On Thursday, October 30, the IRS announced annual inflation adjustments for various 2015 tax provisions.  Two figures to note in the estate planning arena are the Federal estate (basic) lifetime exclusion, and the annual exclusion for gifts. 

The Federal estate tax exemption increased to $5,430,000 for 2015, roughly a 1.7% increase from 2014’s $5,340,000.  For more information on estate planning and the basics of portability, please see our previous blog post here.

IRS Announces Cost-of-Living Adjustments

Earlier this week, both the Internal Revenue Service and the Social Security Administration announced cost-of-living adjustments impacting the 2015 tax year.

First, the IRS the announced a number of cost-of-living adjustments related to retirement items. Below are some of the main points announced by the IRS:

  • Taxpayers who participate in 401(k) plans, 403(b) plans, 457 plans, or the Federal government’s Thrift Savings Plan, may now choose to make annual elective deferrals of up to $18,000 in 2015. The annual catch-up contribution limit for taxpayers aged 50 years or over has also increased to $6,000.
  • The 2015 limit for annual contributions to Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The annual catch-up contribution for taxpayers aged 50 years or over also remains the same at $1,000.
  • For defined contribution plans, the maximum contribution for 2015 has increased to $53,000 while the annual compensation limit has increased to $265,000.

Virginia Recognizes Same-Sex Marriages for Tax Purposes


Last year, The Supreme Court ruled in United States v. Windsor that same-sex married couples could be treated as married under federal law.  This had broad implications for US federal taxes for same-sex married couples, but at the state level the laws continued to vary state by state.  When the IRS issued its guidance, they clarified that for tax purposes the IRS would recognize any marriage entered into legally in a state that allowed the marriage, regardless of current residence. 

In states like Maryland or the District of Columbia, which allowed same-sex marriages to be performed in the state and also recognized same-sex marriages entered into legally in other states, the federal tax law and state tax law were now in parity.  States that had not yet recognized same-sex marriage, however, like Virginia, were left to their own to determine how to treat same-sex couples residing in their state, even if they were legally married elsewhere.  Virginia initially ruled that it would not recognize the marriages, and couples would have to file separate state tax returns, even if they filed a joint federal tax return.

Tax Principal Brian Wynne Discusses How Your Tax Filing Status Affects What You'll Pay

Bond Beebe Principal, Brian Wynne, was recently quoted in a Business Insider article about common life changes and how they affect your tax bill.  Click Here for the full article.

Inherited IRA's Not Protected from Bankruptcy

It is now official that inherited IRAs are not considered “retirement funds” within the meaning of federal bankruptcy law and therefore are not exempt from a bankruptcy estate. This ruling was handed down by the Supreme Court in the case of Clark, et ux v. Rameker on June 12, 2014.

Typically, retirement funds (IRAs and Roth IRAs) are exempt from a bankruptcy estate and therefore shielded from creditors in bankruptcy. This was done to help debtors to provide for their retirement, even after bankruptcy. However, the Supreme Court ruled that inherited IRAs do not qualify as retirement funds.

Retirement Planning: Roth vs. Traditional 401(k) Plans

roth-vs-traditional-401kThis post was written with the assistance of Ashleigh Zeller from the Firm's Benefit Plan sector.  

With many employers now offering a Roth 401(k) component with their retirement benefits, you may be wondering which option works best for your retirement planning purposes. Like most questions involving tax planning matters, the answer is rarely straightforward.

In this post, we’ll look at the differences between Roth and traditional 401(k) plans, as well as Roth IRA and Roth 401(k) plans, and cover some of the tax consequences you may incur when using these retirement savings strategies.

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