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Keep it SIMPLE: A Tax-Advantaged Retirement Plan Solution for Small Businesses

If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help you attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2018.

The basics

SIMPLE stands for “savings incentive match plan for employees.” As the name implies, these plans are simple to set up and administer. Unlike 401(k) plans, SIMPLE IRAs don’t require annual filings or discrimination testing.

SIMPLE IRAs are available to businesses with 100 or fewer employees. Employers must contribute and employees have the option to contribute. The contributions are pretax, and accounts can grow tax-deferred like a traditional IRA or 401(k) plan, with distributions taxed when taken in retirement.

As the employer, you can choose from two contribution options:

  1. Make a “nonelective” contribution equal to 2% of compensation for all eligible employees. You must make the contribution regardless of whether the employee contributes. This applies to compensation up to the annual limit of $275,000 for 2018 (annually adjusted for inflation).
  2. Match […]
By |September 6th, 2018|investment, ira, retirement|0 Comments

The TCJA Prohibits Undoing 2018 Roth IRA Conversions, but 2017 Conversions are Still Eligible

Converting a traditional IRA to a Roth IRA can provide tax-free growth and tax-free withdrawals in retirement. But what if you convert your traditional IRA — subject to income taxes on all earnings and deductible contributions — and then discover you would have been better off if you hadn’t converted it?

Before the Tax Cuts and Jobs Act (TCJA), you could undo a Roth IRA conversion using a “re-characterization.” Effective with 2018 conversions, the TCJA prohibits re-characterizations — permanently. But if you executed a conversion in 2017, you may still be able to undo it.

Reasons to recharacterize

Generally, if you converted to a Roth IRA in 2017, you have until October 15, 2018, to undo it and avoid the tax hit.

Here are some reasons you might want to recharacterize a 2017 Roth IRA conversion:

  • The conversion combined with your other income pushed you into a higher tax bracket in 2017.
  • Your marginal income tax rate will be lower in 2018 than it was in 2017.
  • The value of your account has declined since the conversion, so you owe taxes partially on money you no longer have.

If you re-characterize your 2017 conversion but would still like to convert your traditional IRA […]

By |August 14th, 2018|contributions, New Tax Laws, roth ira|0 Comments

Still Time to Contribute to an IRA for 2016

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Available in one form or another since the mid-1970s, individual retirement arrangements (IRAs) are designed to enable employees and the self-employed to save for retirement. Contributions to traditional IRAs are often deductible, but distributions, usually after age 59½, are generally taxable. Though contributions to Roth IRAs are not deductible, qualified distributions, usually after age 59½, are tax-free. Those with traditional IRAs must begin receiving distributions by April 1 of the year following the year they turn 70½, but there is no similar requirement for Roth IRAs.

Most taxpayers with qualifying income are either eligible to set up a traditional or Roth IRA or add money to an existing account. To count for a 2016 tax return, contributions must be made by April 18, 2017. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the saver’s credit when they complete their 2016 tax returns.

Generally, eligible taxpayers can contribute up to $5,500 to an IRA. For someone who was at least age 50 at the end of 2016, the limit is increased to $6,500. There’s no age limit for those contributing to a Roth IRA, but anyone who was at […]

By |March 20th, 2017|ira, irs|0 Comments

Deadline for Receiving First 2016 IRA Required Minimum Distribution (RMD) Is April 1

Individuals who turned 70 1/2 in 2016, but opted to wait until 2017 to begin taking their RMD for 2016 must receive their 2016 RMD by 4/1/17, even though that date falls on a Saturday. IRS Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs), does not offer an alternative date, such as the following Monday, 4/3/17, to receive the distribution, so please keep that in mind. If you have any questions, please contact your Linkenheimer CPA.

By |March 3rd, 2017|ira, irs|0 Comments

April 1 Required Minimum Distributions Deadline Approaching

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Individuals who attained age 70 1/2 in 2015 must begin taking Required Minimum Distributions (RMDs) from their traditional IRAs by 4/1/16. Qualified retirement plan participants (e.g., 401(k) participants) also must begin taking RMDs if they reached age 70 1/2 or retired in 2015, whichever came later (except for 5% owners, who are subject to the IRA rules). Note that a qualified plan may require all employees (including non-5% owners) to take RMDs by April 1 of the year following the year the employee attains age 70 1/2. If you have any questions about the deadlines or RMDs, please contact your Linkenheimer CPA.

By |March 29th, 2016|ira, retirement|0 Comments

Charitable contributions from IRAs

Eligible taxpayers have until Wednesday, 12/31/14, to make Qualified Charitable Distributions (QCDs) from their IRAs. QCDs of up to $100,000 per year from IRAs are available to taxpayers who are age 70.5 or older. QCDs are not taxable, and they can be can’t be deducted as a charitable contribution. However, they can be counted as 2014 Required Minimum Distributions (RMDs) if made by the 12/31/14 deadline. Although this break was set to expire on 12/31/13, it was extended through 2014 by the recently enacted TIPA (Tax Increase Prevention Act).

Written by Mike Musson, CPA, Partner

By |December 30th, 2014|charity, ira|0 Comments

You Can Unwind Roth IRA Conversion Before October 15, 2014

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The market has generally been up since 2013, but if the value of your IRA has declined since your 2013 conversion date, or if your cash situation has changed significantly since you decided to convert, you can “recharacterize” the conversion transaction and avoid the tax. Generally speaking, you can unwind the conversion with a trustee-to-trustee transfer from the Roth back to a traditional IRA no later than 10/15/14.  If you have already filed your 2013 return, you will need to amend.

Please call us if you have questions.

By |October 7th, 2014|ira, retirement, roth ira|0 Comments