A wide range of federal tax elections gives individual taxpayers options for how they report certain income or expense items. Some of the more common elections for individuals concern retirement plans, medical expenses and interest expense. Each election has specific rules as to who can make the election, when and
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TOPICS / PERSONAL FINANCIAL PLANNING
Retirement planning
Using a Qualified Plan Account to Fund a Roth IRA Conversion
Roth IRAs have become popular retirement savings options since their introduction in 1998. However, high-income individuals have not been able to take advantage of the Roth IRA opportunity. Recent tax law changes expand the Roth IRA to all taxpayers who have or could have traditional IRA accounts. Background Before 2010,
Life Insurance Checkup
Life insurance policies often form a large percentage of a client’s net worth. As goals, needs and products evolve, advisers should review their clients’ insurance portfolio to make sure it is optimized. Follow these steps to get started: —By Cory Chmelka, CFP, (cchmelka@capwm.com) managing partner of Capstone Wealth Management LLC
Tax Consequences of Rollovers from Employer Plans to Roth IRAs
Starting in 2010, taxpayers can make rollovers from non-Roth retirement accounts to Roth individual retirement accounts (IRAs) without regard to the former $100,000 modified adjusted gross income (AGI) limit and (in 2010 only) can benefit from a special two-year averaging provision (the taxable portion of the rollover is taxed in
Waiving the 60-Day IRA Rollover Rule
Onerous consequences can result when taxpayers fail to follow through with an IRA tax-free rollover. Generally, the entire amount distributed from an IRA or other qualified trust or eligible retirement plan must be deposited in another such account within 60 days. Otherwise, it is included in the taxpayer’s gross income
Excerpts From the Personal Financial Planning Round Table
Editor’s note: These are Web-exclusive excerpts from the JofA‘s round table discussion with members of the AICPA’s Personal Financial Planning Section. Also read “Lessons Learned From the Financial Crisis,” Oct. 09. PARTICIPANTS’ PERSPECTIVES ON GETTING INTO PERSONAL FINANCIAL PLANNING Lyle Benson: We’re all living examples of CPAs who made the
Employee Benefits
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) provided transition relief for plan administrators of 403(b) plans who make a good faith effort to comply with applicable annual reporting requirements for the 2009 plan year. The guidance in the EBSA’s Field Assistance Bulletin (FAB) no. 2009-02 allows 403(b)
No Penalty Tax on Additional IRA Distributions
The Tax Court ruled that paying higher education expenses from an IRA was not a modification of a taxpayer’s annuity payments from the IRA that would have made the payments subject to the 10% additional tax on early distributions. Generally under IRC § 72(t), distributions received from an IRA before
Loan Refinancing Deemed a Taxable Distribution
The Tax Court found that the amount by which a taxpayer’s refinancing of a loan from his qualified retirement plan exceeded statutory limits was a deemed distribution subject to the 10% additional tax. Under section 72(p)(2), a loan from a qualified retirement plan to a participant is not treated as
Defined Contribution Plans for Nonprofit Organizations
When it comes to qualified retirement plans, the 403(b) has long been the default alternative for nonprofit organizations. The lack of nondiscrimination testing for elective deferrals and no plan audit requirement as well as the ability to avoid Employee Retirement Income Security Act (ERISA) regulations have traditionally been the biggest
Taking Advantage of the RMD Holiday for IRAs
For 2009 only, the required minimum distribution (RMD) rules applicable to retirement plan withdrawals have been waived. This allows retirees to forgo a year’s distributions. The benefit of this suspension may seem obvious: The beneficiary can defer taxable income and hopefully the holdings—likely battered over the past year—can recover before
CPA Financial Planners Assess New Risk Environment
Eighty percent of CPA financial advisers are strongly recommending a mix of growth and income securities for their clients, according to an online survey of members of the AICPA’s Personal Financial Planning Section. The survey, conducted between April 22 and June 4, showed that CPAs are re-evaluating their clients’ risk
Retirement Planning Using a Client’s Tax Return
Many CPAs never follow up with clients after tax season, but CPAs can provide valuable assistance by taking some time after busy season to use the tax return as a guide to helping clients prepare for retirement. A tax return is an excellent starting point for the personal financial planning
The Complete Guide for Investing During Retirement
by Thomas MaskellAdams Media, 2009, 256 pp. If you, or a client, have reached retirement age with only a modest savings for retirement, this book is for you. With no market experience, former engineer Thomas Maskell started his investing career during retirement and learned the business of buying and selling
Bookshelf Review
The Sex of a Hippopotamus: A Unique History of Taxes and Accounting by Jay Starkman Twinset Inc., 2008, 456 pp. The Sex of a Hippopotamus by Jay Starkman is a well-documented and interesting read for professionals in the accounting and tax fields. In particular, this book is appealing to instructors,
Comparison of Cumulative Monthly Social Security Benefits
Using a side-by-side spreadsheet comparison of cumulative monthly Social Security benefits (reflecting the 11 months for the first year in which benefits accrue after reaching age 62 and assuming a 3% COLA) CPA financial planners can show clients how the 58-year-old worker without consideration of a spouse (illustrated in Exhibit
Social Security for Two
CPA financial planners are often confronted with the question, “When should I start collecting Social Security benefits?” For married couples, the question should be asked in the plural. Current financial needs and expected life span may be paramount considerations for a single person. However, the implications of when to begin
Annuities and the Other Side of the Retirement Savings Coin
Like many of their clients, CPAs tend to consider the problem of retirement planning solved once they develop a plan for accumulating savings during the client’s working years. But as recent events have shown, panics and bear markets can add another dimension to the equation. Moreover, there is another side
AICPA and InvestmentNews Offer Online Discussion Forum for Financial Advisers
The AICPA and InvestmentNews have launched “Ask the CPA,” an online discussion forum on advising clients in times of economic crisis. InvestmentNews readers may post their questions at www.investmentnews.com/community. CPAs holding the Institute’s personal financial specialist (CPA/PFS) credential will respond. The forum will run through December 31, 2008. “This is an
Top Things to Know About Roth 401(k)s
Roth IRAs have become popular retirement vehicles, but the low contribution limits and participant income limitations have prevented many people from taking advantage of them. The Economic Growth and Tax Relief Reconciliation Act of 2001 provided for designating Roth contributions within a qualified plan. Now many individuals previously excluded can
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