Sec. 408(d)(1) ordinarily requires a pro rata allocation between taxable and nontaxable amounts (using the Sec. 72 annuity rules) when reporting distributions received from an individual retirement plan (an individual retirement account or annuity (IRA)). The practical effect is that a taxpayer must recover any nontaxable amount (basis) ratably as
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TOPICS / PERSONAL FINANCIAL PLANNING
Retirement planning
Properly assessing the reverse mortgage option
The recent recession left no age group untouched, but baby boomers were hit especially hard. High unemployment and an uncertain stock market have caused older Americans to realize that their retirement funds might not support their desired lifestyle. Many seniors are facing foreclosure, while others are unable to meet their
Financial matters are top cause of couples’ spats, survey shows
Couples argue more about financial matters than any other topic, according to a Harris Interactive survey conducted for the AICPA. Twenty-seven percent of respondents in a national survey who are married or living with a partner said disagreements over money are most likely to prompt an argument. None of the
Young Americans fail to frequently check bank balances, survey shows
Although technology has made it easier to track finances, many Americans aren’t taking advantage of the opportunity, according to a new survey. Seventeen percent of 18- to 34-year-olds check their bank accounts daily, according to a national telephone survey conducted for the AICPA by Harris Interactive in recognition of National
Technology extracts a big price from Americans, survey shows
Americans’ infatuation with technology such as cellphones, cable TV, and satellite radio isn’t helping them fatten their bank accounts, according to a survey conducted for the AICPA by Harris Interactive for National Financial Literacy Month. Fifty-six percent of U.S. adults said they believe that technology has made it easier to
Americans dedicated to long-term financial well-being, survey shows
Americans are devoted to preserving their long-term financial well-being and would rather give up eating at restaurants and using technology than stop saving for retirement, a new survey shows. Just 2% of the 1,005 U.S. adults participating in a telephone survey said the one action they most likely would take
Planning and paying for partner retirements
John was one of three founding partners in a firm formed 35 years ago. He oversaw the buyout of the other two founding partners and, as managing partner, groomed three young managers as his successors. However, when the time came for these managers to be admitted as partners, two of
TIGTA: Revise Form 1099-R to improve taxpayer compliance
In a report released on Tuesday, the Treasury Inspector General for Tax Administration (TIGTA) recommended the IRS change its Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., to improve taxpayer compliance with reporting and paying tax on this type of income (TIGTA, Opportunities Exist
IRS, Labor Department proposals aim to increase retirement options and transparency
Federal initiatives designed to broaden options and increase transparency in retirement plans were announced Thursday. The IRS issued proposed regulations that would make it easier for defined benefit pension plans to offer combinations of lifetime income and single-sum cash payments (REG-110980-10). Other proposed regulations released on Thursday would relax the
Prop. regs would ease required minimum distribution rules for older retirees who purchase certain annuities
The IRS issued proposed rules (REG-115809-11) that would permit IRA participants to enter into contracts for annuities that begin at an advanced age (often called longevity annuities), using a certain amount of their account balances without having these amounts count for calculating required minimum distributions from the IRAs under Regs.
Top-hat retirement plans
Tax-exempt entities may establish as many as three types of tax-favored retirement plans. They may, of course, establish qualified retirement plans. They may also establish Sec. 403(b) plans, generally known as tax-sheltered annuities. The tax law treats distributions from qualified plans and tax-sheltered annuities similarly, a treatment generally familiar to
Many Baby Boomers See Retirement Delayed at Least Four Years
Half of baby boomer clients who have postponed retirement due to the economic downturn expect to work at least four years longer than they originally planned, according to CPA financial planners surveyed by the AICPA. That’s even with resurging confidence in the stock market, which, with recent gains, is helping replenish
Ponzi-Scheme Losses: Indirect Investor and State Tax Issues
Ponzi schemes continue to come to light regularly. After 2008, when Bernard Madoff’s $65 billion Ponzi scheme was exposed, the SEC made comprehensive reforms to better detect fraud within the 11,000 regulated investment advisers and 8,000 mutual funds that it oversees, according to the SEC’s description of those reforms (tinyurl.com/2fu6eog).
Social Security “Do-Over” Now Limited
The Social Security Administration issued a final rule that limits beneficiaries’ ability to stop their Social Security retirement payments, repay their cumulative past benefits, and start receiving higher payments available to older applicants. The SSA said the restrictions were necessary to prevent abuse of the option, which has been called
Using Refund Splitting to Fund IRAs
Individual taxpayers have the option to split direct deposit federal tax refunds among up to three (open) accounts with up to three U.S. financial institutions that accept direct deposits. Refunds can fund several kinds of accounts, including checking, savings, individual development accounts, IRAs (traditional, Roth and SEP), health savings accounts,
Notice Gives Guidance on In-Plan Roth Rollovers
On Friday, the IRS issued guidance on how plan participants can make rollovers from a 401(k) or 403(b) plan to a designated Roth account in the same plan (Notice 2010-84). Such in-plan Roth rollovers are now permitted under IRC § 402A(c)(4), as amended by the Small Business Jobs Act of
Multiemployer Gap Drives Up Pension Insurer’s Deficit
The Pension Benefit Guaranty Corp. (PBGC) said its deficit increased to $23 billion at the end of fiscal 2010, a 5% increase over the $22 billion deficit recorded in 2009, and more than half of that increase was attributed to a growing gap in multiemployer plans, according to the 2010
Roth IRA Conversion Quiz
By now, CPAs have heard much about Roth IRA conversions made widely available in 2010. Take the following test to see how much you’ve learned. TRUE OR FALSE? 1. Starting in 2010, there are no income limitations to make regular contributions to a Roth IRA. 2. Roth IRA investment income
Regular IRA to Roth IRA Conversion: Evaluating the Income Recognition Options
Editor’s note: Also read “Deferral and Spreading of Roth Conversion Income Not Always Best,” in the July 2010 issue of the Journal of Accountancy. Click here to download “Regular IRA to Roth IRA Conversion: Evaluating the Income Recognition Options,” an illustrative spreadsheet that allows planners to choose between two possible
Deferral and Spreading of Roth Conversion Income Not Always Best
This year has been touted as the Year of the Roth IRA Conversion (“2010: The Year of the Roth Conversion?” JofA, Jan. 2010, page 28). Advice abounds on when to carry out a conversion and how to pay for it. Often, though, a thorough analysis of the alternatives requires planners
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