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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.

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.

Protecting Yourself from Tax-Related Identity Theft

tax-related-identity-theftLast week the IRS released its annual “Dirty Dozen” Tax Scams for 2014 as a reminder to be on the lookout for fraud and take steps to protect sensitive information as you file your taxes. Not surprisingly, identity theft tops this list. 

Tax-related identity theft continues to grow – last year 1.6 million Americans were victims within the first half of the year. It is essential to be on the lookout for scams and take the necessary precautions with your social security number and other personal information.

Hiring your Children in your Business – It’s Not So Taxing

hiring-your-kidsIf you own a business, employing your child can be a great opportunity to teach valuable lessons about earning, saving and hard work. It is also an excellent tax-savings strategy for you and your child. However, before you bring your college kid on your payroll for the summer, there are a number of regulations and savings strategies to keep in mind.

Required Minimum Distribution (RMD) Planning for Those who are Turning 70 1/2 in 2012

Required Minimum Distribution (RMD) planning for those who are turning 70 ½ in 2012.

If you have a 401(k) or traditional IRA plan and are turning 70 ½ this year you are now subject to the RMD rules. These require you to take at least a minimum distribution from your plan based on its balance. The law says the distribution must be taken by April 1st of the year after you turn 70 ½.  While sometimes it makes sense to defer the income as long as possible, this may not be the year to do it.  We don’t know what tax rates will look like in 2013, but they are currently scheduled to go up absent any congressional action to adjust them.  There is also a new 3.8% “Medicare” tax on investment income to the extent your adjusted gross income (AGI) exceeds $200k (single) or $250k (married). If your income is expected to exceed this threshold it may make sense to take the distribution in 2012. You should also consider that if you wait until 2013 to take your RMD you still would need to take the 2013 RMD in 2013, resulting in additional income for that year.  If your AGI was otherwise close to the income limit the 2 payments may push it over the top. 

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