401k - Linkenheimer LLP CPAs & Advisors

Get Credit for IRA Contributions Made by April 15 on 2020 Tax Returns

The Internal Revenue Service notes that taxpayers of all ages may be able to claim a deduction on their 2020 tax return for contributions to their Individual Retirement Arrangement made through April 15, 2021. There is no longer a maximum age for making IRA contributions.

An IRA is designed to enable employees and the self-employed to save for retirement. Most taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account.

Contributions to a traditional IRA are usually tax deductible, and distributions are generally taxable. There is still time to make contributions that count for a 2020 tax return, if they are made by April 15, 2021. Taxpayers can file their return claiming a traditional IRA contribution before the contribution is actually made. The contribution must then be made by the April due date of the return. While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit.

Generally, eligible taxpayers can contribute up to $6,000 to an IRA for 2020. For […]

By Linkenheimer LLP|2021-03-12T17:04:38+00:00March 12th, 2021|401k, ira, retirement|0 Comments

Should Your Business Add Roth Contributions to its 401(k)?

If your business sponsors a 401(k) plan, you might someday consider adding designated Roth contributions. Here are some factors to explore when deciding whether such a feature would make sense for your company and its employees.

Key differences

Roth contributions differ from other elective deferrals in two key tax respects. First, they’re irrevocably designated to be made on an after-tax basis, rather than pretax. Second, if all applicable requirements are met and the distribution constitutes a “qualified distribution,” the earnings won’t be subject to federal income tax when distributed.

To be qualified, a distribution generally must occur after a five-year waiting period, as well as after the participant reaches age 59½, becomes disabled or dies. Because of the different tax treatment, plans must maintain separate accounts for designated Roth contributions.

Pluses and minuses

The Roth option gives participants an opportunity to hedge against the possibility that their income tax rates will be higher in retirement. However, if tax rates fall or participants are in lower tax brackets during retirement, Roth contributions may provide less after-tax retirement income than comparable pretax contributions. The result could also be worse than that of ordinary elective deferrals if Roth amounts aren’t […]

By Linkenheimer LLP|2021-02-24T18:46:47+00:00February 24th, 2021|401k, roth ira|0 Comments

2021 Individual Taxes: Answers To Your Questions About Limits

Many people are more concerned about their 2020 tax bills right now than they are about their 2021 tax situations. That’s understandable because your 2020 individual tax return is due to be filed in less than three months (unless you file an extension).

However, it’s a good idea to acquaint yourself with tax amounts that may have changed for 2021. Below are some Q&As about tax amounts for this year.

Be aware that not all tax figures are adjusted annually for inflation and even if they are, they may be unchanged or change only slightly due to low inflation. In addition, some amounts only change with new legislation.

How much can I contribute to an IRA for 2021?

If you’re eligible, you can contribute $6,000 a year to a traditional or Roth IRA, up to 100% of your earned income. If you’re 50 or older, you can make another $1,000 “catch up” contribution. (These amounts were […]

By Linkenheimer LLP|2021-02-10T22:54:28+00:00February 10th, 2021|individuals, New Tax Laws, social security, tax|0 Comments

8/31 is Deadline to Repay Any Required Minimum Distributions Taken in 2020

The Internal Revenue Service announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides […]

By Linkenheimer LLP|2020-09-03T20:02:05+00:00August 13th, 2020|deduction, deductions, ira, New Tax Laws|0 Comments

Answers To Your Questions About 2020 Individual Tax Limits

Right now, you may be more concerned about your 2019 tax bill than you are about your 2020 tax situation. That’s understandable because your 2019 individual tax return is due to be filed in less than three months.

However, it’s a good idea to familiarize yourself with tax-related amounts that may have changed for 2020. For example, the amount of money you can put into a 401(k) plan has increased and you may want to start making contributions as early in the year as possible because retirement plan contributions will lower your taxable income.

Note: Not all tax figures are adjusted for inflation and even if they are, they may be unchanged or change only slightly each year due to low inflation. In addition, some tax amounts can only change with new tax legislation.

So below are some Q&As about tax-related figures for this year.

How much can I contribute to an IRA […]

By Linkenheimer LLP|2020-09-03T20:03:16+00:00March 5th, 2020|401k, deduction, deductions, ira, social security, tax deductions, tax implications, taxable income|0 Comments