If you have IRAs and accounts in qualified retirement plans (such as 401(k) plans), you must begin to take distributions by a set time or pay a hefty 50% penalty on insufficient withdrawals. The rules...
Understanding taxes is complicated, more so by the fact tax pros and the IRS often use abbreviations to denote various tax terms. To better utilize tax breaks and opportunities, it’s helpful to know...
Those who have an IRA or qualified plan benefits must take distributions under required minimum distribution (RMD) rules. When distributions are required but not taken, there is a hefty 50% penalty on...
Investments within your IRA determine how much income you’ll have from your IRA in retirement. The better your investments do, the greater your income. However, the tax law restricts the type of inv...
What can you do with a tax refund? Here are some suggestions that can help you generate future tax rewards:Make an IRA or Roth contribution (if eligible) Contribute to a health savings account ...
The tax law usually restricts the ability to benefit tax-wise from an expenditure to one tax break. This break may be an exclusion from income, a tax deduction, or a tax credit. However, there is one ...
Soon, you'll be focusing on your 2011 tax return. But before you do, start thinking ahead to 2012 so you can take advantage of opportunities for this year. Here are some of the changes to know so that...
The tax law creates incentives to encourage retirement savings. These incentives only go so far...
There is a special break for those age 70û and older. Such individuals can make direct transfers (rollovers) of distributions from their IRAs to a public charity and avoid any income tax on such dist...
You are not taxed on the value of retirement planning advice you (and your spouse) receive through your employer. You can exclude this benefit from your income. There is no dollar limit on what you ca...
If you contribute to a retirement plan through your company or to an IRA, you may be eligible to claim a tax credit of up to 50% of contributions up to $2,000, for a top credit of $1,000. This credit ...
If you are self-employed or a shareholder in a corporation, the business can set up a savings incentive match plan for employees (SIMPLE) that allows you (and your employees) to make elective deferral...
If you are self-employed (sole proprietor, independent contractor, partner, or limited liability company member) and have a profitable year, you can make deductible contributions to a simplified emplo...
Having a qualified retirement plan means you are subject to annual reporting requirements referred to earlier; the government wants to know some details about your plan.Generally, for the 2011 pla...
In 1962, self-employed individuals for the first time were given the opportunity to set up tax-qualified retirement plans similar to those available to corporations. Initially referred to as HR 10 pla...
If you are eligible to participate in your employer's 401(k) or similar plan, you can agree each year to contribute a portion of your salary as your contribution to the plan. You can change your contr...
If you take a distribution from your IRA and plan to make a rollover, you have 60 days to complete the action. Watch the calendar closely because if you miss the deadline by even 1 day, the entire dis...
You can transfer funds from one IRA to another without any current tax. There are no dollar limits on the amount you can roll over each year.There are two ways in which to make the transfer:D...
Should you convert an existing traditional IRA or 401(k) plan account to a Roth IRA? There is no fixed answer; it depends on your situation. Factors to consider:Your age. The younger you are, the...
Assume you qualify to make either a traditional or Roth IRA contribution. Which is better for you? Keep in mind that you can contribute to both in the same year, as long as your total contributions do...
- For purposes of the 3.8% additional Medicare tax on net investment income in 2013, how does this relate to rental income?
- Can I make a direct transfer of my IRA to my church and qualify for tax-free treatment (up to $100,000)? I’m 72 years old.
- I sold my residence at a loss. How do I report this on my tax return?
- I traveled to Africa on a mission trip with my church. I paid for the airfare. Can I deduct it?
401(k) and Similar Plans
Pensions used to be the responsibility of employers, but for the past quarter of a century that responsibility has shifted to employees. To make it easier for employees to pay for their own retirement savings, the tax law has created special retirement plans. Companies set up the plans, but employees fund them (in whole or in part) by contributing a portion of their salary each year. Employees decide how their contributions are to be invested by selecting from a menu of investment options provided by the employer. The tax law encourages employee contributions by allowing them to escape immediate taxation.
If you are eligible to participate in your employer’s 401(k) or similar plan, you can agree each year to contribute a portion of your salary as your contribution to the plan. You can change your contribution from year to year; you may also be able to reduce it within a year.
Your contribution is called an elective deferral or salary reduction amount. This amount is not treated as compensation to you for the year; you do not pay income tax on your elective deferral (you do pay Social Security and Medicare taxes on the elective deferral). For example, if your wages this year are $45,000 and you contribute $8,000 to your company’s 401(k) plan, only $37,000 of your wages for purposes of income taxes is reported on your Form W-2; you only pay income taxes on $37,000 this year.
Note: Contributions to a Roth 401(k) are not treated as elective deferrals; they must be made with after-tax contributions.
For the fifth straight year, there has been in increase in the number of returns reporting alternative minimum tax (AMT) liability
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