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.
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.
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.
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.
In an effort to provide taxpayers with more service options, the IRS has announced the start of a new web-based based payment system called IRS Direct Pay. Individual taxpayers filing 1040 return series can use IRS Direct Pay 24 hours a day, 7 days a week to pay any balance due on their tax returns or make estimated payments without incurring any additional fees or having to pre-register.
Some of the key features provided by IRS Direct Pay include:
While the current system is limited only to payments for 1040 returns, the IRS has plans to expand the service and offer additional options for users and will most likely add additional payment types in the future. Other future expansions include payment confirmations via e-mail and a login option that would allow users quick access or return visits.
For more information, check out the IRS’ News Release and FAQ for more information.
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