TMTW 149 – Saving Taxes on IRA Inherited from Your Spouse

Posted on August 14, 2013 by taxblogger

Tax and Money Tip of the Week:
Saving Taxes on IRA Inherited from
Your Spouse | August 14, 2013 | No. 149

How is my spouse’s IRA taxed when he dies and I am the sole beneficiary of his IRA? How does his death impact our Required Minimum Distributions?
 
IRA’s can be subject to 2 different taxes upon the owner’s death. The IRA is part of the estate and is subject to estate tax AND you, as the beneficiary, must pay income tax when you take any distributions from the IRA. A little planning can help to reduce or postpone these taxes.
 
Income taxes – Income tax must be paid when you take distributions from your spouse’s inherited IRA, including the Required Minimum Distributions (RMDs).
 
When an IRA is inherited from someone who has already begun taking RMDs, generally the RMD’s continue, however, they are now calculated on the life expectancy of the beneficiary.
 
As the spouse (and sole beneficiary), you get some additional benefits that may minimize the RMD and help save/postpone taxes. You can redesignate your spouse’s IRA as your own, or you can simply roll over the IRA into your own IRA or other retirement plan. By doing one of these actions, you could postpone RMDs until you reach age 70 ½.
 
Additionally, you could choose to name a new beneficiary, such as your child, which would decrease the amount of the RMD calculation as well.
 
Estate taxes – Every individual’s estate is exempt from tax on up to $5.25 million. Additionally, this exemption is “portable” between spouses, which means that if your spouse does not use his/her entire exemption, the remaining amount can by used by your estate. The estate tax rules also allow an unlimited marital deduction, which means that estate tax is only paid after both spouses have died.
 
It is very important that you always have primary and contingent beneficiaries named on all of your IRAs or qualified retirement plan accounts for any non-spouse beneficiary to be able to set up an inherited IRA. This is a complex tax area. Call us to help you save taxes when you inherit an IRA.
Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , , , , | Leave a comment

TMTW #148 – September 15, 2013 Tax Deadlines: Individual Estimated Taxes and Tax Planning Checkups

Posted on August 7, 2013 by taxblogger

Tax and Money Tip of the Week: September 15, 2013 Tax Deadlines: Individual Estimated Taxes and Tax Planning Checkups | August 7, 2013 | No. 148

This is the time of year in our CPA practice that I work with small business owners and individuals to perform tax checkups to help them project their tax liabilities for 2013 and make tax saving recommendations of moves they can make between now and year-end. Frequently, just defining the amount of taxes they owe via these planning services helps manage their cash flow so the businesses and individuals don’t have a big amount due and/or surprise each Spring when they prepare their tax returns.

Coming up September 15, 2013 is the date in which the 3rd installment for individuals that have income that is not taxed and withheld (like W-2 income) is due.

Self employed businesses, e.g. Proprietor Schedule C filers, folks that own S Corporations, Partnerships, LLCs, or other flow-through entities must estimate their unpaid income and/or self-employment taxes for the period January 1-August 31, 2013 and pay ½ of this amount to IRS and/or NC Dept of Revenue on September 15, 2013 and the other ½ of this amount on or before January 15, 2014.  (April 15th and June 15th of each year are also Quarterly Estimated Tax Payment dates that have also passed by if you weren’t aware)

The rules for estimated tax payments depend on your modified adjusted gross income for 2013. “Safety” estimates can be designed to avoid penalties and interest, optimize cash flow, and save taxes.

Please give us a call to help you save taxes in 2013.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP® …until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , , | Leave a comment

TMTW #146 – Small Businesses Lose in New NC Tax Law Changes

Posted on July 24, 2013 by taxblogger

Tax and Money Tip of the Week:
Small Businesses Lose in New
NC Tax Law Changes
July 24, 2013 | No. 146

The tax reform bill that Governor McCrory signed into law yesterday will impact many small businesses. See the recent article from The News & Observer below.

N.C. Lawmakers Approve Tax Bill

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW #145 – Good Communication is Key to Lowering Your Taxes

Posted on July 18, 2013 by taxblogger

Tax and Money Tip of the Week:
Good Communication is Key to
Lowering Your Taxes
July 18, 2013 | No. 145

After over 30 years in the tax business, I continue to find that good communication with the CPA is the key to lowering taxes.
 
Solid bookkeeping for your business enables you to take the most deductions possible while minimizing taxes.
 
Mid-year tax planning also helps plan and keep up with your current taxes,  prevents unwanted surprises, and saves a lot of taxes for our clients each year.
 
We appreciate all of our clients and thank you for your business.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , , , | Leave a comment

TMTW #144 – Making Charitable Contributions Directly from Your IRA

Posted on July 10, 2013 by taxblogger

Tax and Money Tip of the Week:
Making Charitable Contributions
Directly from Your IRA
July 10, 2013 | No. 144

I recently spoke with a client who wanted to know whether he could still make a contribution from his IRA directly to his church and not have it be included in his taxable income for 2013. This always seems to be a popular topic of conversation this time of year.
 
He was referring to the Qualified Charitable Distribution (QCD) provision of the tax law that allows a tax-free distribution directly to a charity, up to $100,000, from your IRA if you are 70 ½ or older. This distribution also counts towards your Required Minimum Distribution (RMD).
 
The good news is that the IRS did extend this provision, but only through the end of 2013. Also, just to be clear, the provision is good for transfers to charities from IRAs only! Transfers from other types of retirement accounts (like 401(k)s) are NOT eligible.
 
In addition to the QCD counting towards your RMD, there may be other tax benefits. While the amount of the QCD is not available for you to use as a charitable donation on your tax return, the QCD is also not counted as part of adjusted gross income. This means that the QCD may help to limit phaseouts of tax deductions or credits as well as decrease the amount of your social security that is taxable and the amount of the new 3.8% surtax on investment income.
  
So if you are 70 ½ or older and give significant charitable gifts, you may benefit from this provision. Call us to setup a time to discuss if this would apply to your tax situation.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , , , , , , , , | Leave a comment

TMTW #143 – Happy 4th of July!

Posted on July 3, 2013 by taxblogger

Tax and Money Tip of the Week:
Happy 4th of July!
July 3, 2013 | No. 143

We would like to take the time to wish everyone a safe and happy 4th of July!

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , | Leave a comment

TMTW #142 – New Reports Show Challenging Financial Outlook Continues for Social Security and Medicare

Posted on June 26, 2013 by taxblogger

Tax and Money Tip of the Week:
New Reports Show Challenging Financial Outlook Continues for Social Security and Medicare
June 19, 2013 | No. 142

Here’s an interesting and timely article.

New Reports Show Challenging Financial Outlook Continues for Social Security and Medicare

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , | Leave a comment

TMTW #141 – The Risks of Bonds – Part II

Posted on June 12, 2013 by taxblogger

Tax and Money Tip of the Week:
The Risks of Bonds – Part II
June 12, 2013 | No. 141

Last week, we talked about the risk that inflation plays in the bond market. Continuing on that line, I wanted to provide you with a quick example of how rising interest rates due to inflation can have an effect on the value of bonds (and bond funds).

The table below illustrates how future increases in interest rates effects the value of a $100,000 bond purchased today.

    Bond                  Bond Value                    Bond Value
Maturity          with 1/2% rate               with 1% rate
                          increase in 1 year       increase in 1 year

  1 YR                        $99,500                       $99,035

  2 YR                       $99,020                       $98,060

  5 YR                       $97,825                        $95,700

10 YR                      $96,175                       $92,500

15 YR                      $94,900                       $90,150

20 YR                     $93,950                       $88,400

30 YR                    $92,650                        $86,125

With this quick example, you can see how even minor rate increases can erode the value of a bond.

The reason for this is that in a rising interest rate environment, new bonds would pay better yields; therefore when you sell your older bonds, you would lose money as buyers could obtain newer bonds with higher yields.

So, as I said last week, while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Uncategorized | Tagged , , , , | Leave a comment

TMTW #140 – The Risks of Bonds – Part I

Posted on June 5, 2013 by taxblogger

Tax and Money Tip of the Week:
The Risks of Bonds – Part I
May 29, 2013 | No. 140

With recent volatility of the stock market, along with the uncertainty of the real estate market since the “crisis”, some investors have been considering a shift to the bond market.
 
However, while bonds (and bond funds) do pay regular interest, bond yields are currently very low. Additionally, bonds come with a risk that is often forgotten about today – inflation risk.
 
Nobody has worried too much about inflation lately. But, between the massive amount of the national debt and the impending “fiscal cliff”, higher inflation is possible.
 
Inflation is bad for bondholders for 2 reasons –
 
–  Low yielding bond payments won’t allow you to keep up with the rate of inflation, meaning the interest earned on your bonds will buy less

–  Inflation causes interest rates to rise, so new bonds would pay better yields; therefore if you sold your older bonds, you would lose money as buyers could obtain newer bonds with higher yields
 
So while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , , , , | Leave a comment

TMTW #139 – Firm Summer Hours

Posted on May 29, 2013 by taxblogger

Tax and Money Tip of the Week:
May 29, 2013 | No. 139

New Firm Hours: Closing Fridays for Summer 2013

Starting May 31, 2013, our firm will be closed on Fridays through September 15, 2013 since we work Saturdays January to April 15th of each year.
 
Our hours of operation will be from 9:00 am to 5:00 pm, Monday through Thursday of each week.
 
Any items may be dropped through our mail slot in the front door or voicemails may be left for return calls each Monday.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

Posted in Tax and Money Tip of the Week | Tagged , , | Leave a comment