Jan 30

Qualified Charitable Donations

Section 208 of the American Taxpayer Relief Act of 2012, (P.L. 112-240) (the Act), enacted Jan. 2, 2013, extended application of Internal Revenue Code section 408(d)(8), reauthorizing qualified charitable distributions (QCDs) made during 2012 and 2013.  Here are some QCD examples to help navigate those rules.

Pre-Act QCD Made

An individual retirement account creator made an IRA distribution payable to a charity that would have qualified as a QCD, but for the absence of legislation extending the availability of QCDs after Dec. 31 2011.  Pre-Act QCDs made at any time during 2012 now qualify.  Some wrote $100,000 in checks from their IRAs directly to qualifying charities during 2012, just in case Congress would retroactively extend QCDs.  Because Congress did so, those checks qualify as 2012 QCDs.

Contributions Made After RMD Withdrawal

An IRA creator-taxpayer withdrew $100,000 of 2012’s required minimum distribution in December 2012; he made $100,000 of charitable contributions in December 2012 after the IRA withdrawal.  He may designate up to $100,000 of December 2012 QCDs as 2012 QCDs made out of the 2012 RMD. In addition, all of 2013’s $100,000 QCD is available.

Contribution Made After IRA Withdrawal

An IRA creator made $100,000 of 2012 IRA withdrawals during December 2012.  He made $100,000 of charitable contributions in January 2013.  The January contribution can be treated as a 2012 QCD out of those December 2012 withdrawals.  In addition, all of 2013’s $100,000 QCD limit is available.

Automatic Withdrawals Made

An IRA creator and IRA custodian agreed to automatic quarterly withdrawals totaling the 2012 RMD.  The last quarterly RMD was made during December 2012.  The IRA creator may, by January 31, 2013, make a cash contribution of up to $100,000 out of the December 2012 quarterly distribution.  That amount will be treated as a QCD.

Effect of DOMA

Each of two spouses wishes to make a 2013 QCD.  Each has a $100,000 limit; the limit applies to individuals and isn’t affected by marriage.  This means the federal Defense of Marriage Act doesn’t affect their QCDs. .

RMD Not Taken in 2012

A taxpayer didn’t take $100,000 of 2012’s RMD before Dec. 31, 2012.  During January 2013, he can designate up to $100,000 in charitable contributions as 2012 QCDs.  In addition, all of 2013’s $100,000 QCD limit is available.

2013 Withdrawal Made in January

A taxpayer withdrew $100,000 of 2013’s RMD in January 2013.  Charitable contributions made before the withdrawal occurred may not be designated as QCDs.  Nor may January 2013 contributions made after the withdrawal occurred. But all of 2013’s $100,000 QCD limit is still available for future use any time during 2013.

These are just a few examples, check out a more comprehensive list right here.  If you need help handling your donations or have any other IRA related questions, feel free to contact the tax experts at the IRA Financial Group today!

Jan 29

Married Couples and IRAs

Most married couples like to keep their financial account jointly.  That way, when either spouse need to access their funds, they can.  IRA accounts are a little bit different however since only one person can own one, though each spouse may have his/her own IRA.  There are benefits to a married couple as well.

IRS Publication 590 states “If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. You cannot both participate in the same IRA. If you file a joint return, only one of you needs to have compensation.”

If only one spouse works, the spousal IRA rule comes into effect.  So long as one spouse has earned income (job salary, self-employment earnings, etc.), both spouses may contribute to an IRA.  You can contribute up to $5,500 ($6,500 if you are at least 50 years old) to an IRA in 2013.  You can double those amounts if you each have an IRA.  This is another benefit for a married couple.  Instead of having just one IRA, you can double your contributions with two separate IRAs.

There is a way to have both spouses named in the IRA account and that’s with a sole beneficiary.  Each spouse can name the other as beneficiary and when one passes away, the other can treat this inherited IRA as his or her own.

Having one IRA in the family is a good way to save for retirement…having two, reaps twice the benefits!  If you need help in starting and contributing to an IRA (or Roth IRA), contact the tax experts at the IRA Financial Group now.

Jan 28

Withdrawal Options for Early Retirees

Whether you decided to retire early or were forced to because of circumstances beyond your control, you need money to live off of.  Much of your assets are tied up in retirement plans like a 401k or IRA.  If you decide to withdraw from these plans before you are age 59 1/2, you’ll get hit with a 10% early withdrawal penalty from the IRS in many instances.  So how can you make without these annoying penalties?

The best option is to use other assets such as taxable brokerage account, CDs and bonds can be cashed in to help bridge that gap.  A home equity lone of credit is a decent option if you have a short time till age 59 1/2.  If these are not an option, look for a part time job or self-employment work to earn some income.

If you have a Roth IRA, you can take penalty-free withdrawals of your contributions so long as the account has been open for at least five years.  You will incur a penalty if you try to withdraw any earnings.

If you have a 401k and left your job after you turned 55, you can make penalty-free withdrawals as well.  This only applies to your current employer’s 401k.  Any other 401k plans cannot be touched without penalty unless you first roll them over into your current plan.  Not all employers offer this option, so check with your plan first.

Lastly, if you have a fairly substantial IRA, you can choose to annuitize it.  You can set up 72t withdrawals and take substantially equal periodic payments (SEPP) based on your life expectancy.  If you do, the withdrawals have to continue for at least five year or until you’re 59 1/2, whichever is longer.  Seek out a tax professional since the math can get complicated in figuring out your withdrawal amount.

It’s best not to touch your retirement accounts for as long as possible so they continue to grow.  You might not always have this luxury though.  If you need help in your retirement planning, contact a tax expert at the IRA Financial Group @ 800.472.0646 today!

Jan 24

Cut Your 2012 Taxes with an IRA

You should be receiving all your tax forms in the mail shortly and if you’re looking for a way to lessen your tax hit, fund an IRA.  This is beneficial for several reasons.

With a maximum limit of $5,000 if you are under 50 and $6,000 if you’re 50 or older, that’s a good amount of money to bring down your taxable income for last year.  You have until Tax Day, April 15th, to contribute to an IRA and have it count towards last year’s taxes.

Another major reason to open an IRA is if you don’t have an employer-sponsored 401k plan at work.  The sooner you start saving, the longer your money has to grow.

Finally, you can do a lot more with an IRA than you can with your standard 401k.  You’re not limited on what stocks you can invest in, you can invest in other things like real estate and you can shop around to get the lowest fees possible.

Another thing to consider when saving is a Roth IRA.  If you can handle your tax bill from last year, you can invest in a Roth with after-tax dollars.  The plus side here is that distributions in retirement are totally tax-free assuming certain, easy requirements are met.

To get the tax write-off from your IRA contributions you need to not have an available 401k plan.  Single and head-of-households, as well as married couples filing jointly have no income limits to get the break.  There are limits if you have an employee-sponsored retirement plan.

If you have any questions or are looking to get started with an IRA, contact the tax experts at the IRA Financial Group today!

Jan 23

Is a Roth IRA Your Best Option?

Here was a good Q&A about a 45 year old single woman with no dependents making $80,000/year where a 401k was not available to her and she asked if a Roth IRA was right for someone in her position.

A quick reminder about how the two main IRA plans work.  A Roth IRA is funded with already-taxed income.  The money grows tax-free and remains tax-free upon distributions.  On the other hand, a traditional IRA is funded with pre-tax dollars which lessens your income the year(s) you make contributions.  The money grows tax-deferred until taking distributions at which time it is taxed as ordinary income.

As you may already know, the biggest benefit of a Roth is that your money grows tax-free.  Upon distribution, all money, including earnings, can be withdrawn without one nickel paid in taxes.  The biggest disadvantage is having to pay taxes now, when they might be higher than when you hit retirement age.

A person making $80,000/year falls into the the 25% tax bracket.  Contributing to a traditional IRA will not reduce earned income enough to drop him/her into a lower tax bracket.  Even if you think you’ll be in a lower tax bracket later on (which is a big if), the potential of tax-free growth in a Roth usually outweighs the hit you’ll take now on the taxes.

One other thing to note is that with a traditional IRA, once you are age 70 1/2, you must start taking required minimum distributions, even if you don’t need the money.  There are no RMDs with a Roth.  Finally, since you’ve already paid taxes on the contributions, you can take that money penalty free out of the Roth IRA (although that is strongly discouraged).

The tax experts at the IRA Financial Group are there to help you decided what’s best for you.  Give them a call today at 800.472.0646 for a free consultation.

Jan 22

Why a Self-Directed IRA is Right for You

The typical investor sticks with the main types of investments in their retirement accounts such as stock, bonds, mutual funds and ETFs.  Those may be the most popular options, but they’re not the only ones you can choose.  More and more people are looking to invest in other things such as real estate and private business interests.  That’s where the self-directed IRA comes in.  It allows you to invest in virtually anything.

A self-directed may be worth investing in for several reasons.  Those who have had long careers may have most of their savings tied up in their retirement account.  If so, your IRA may be the only way to make a large investment in something unusual.  There may be more profit potential in a private investment than that of just owning stock in a public company.  If you can invest in a private business during its early stages, you may be in for a big payoff.  Looking to buy real estate?  With a self-directed IRA, you can buy an apartment or rent out a house for a nice monthly income to grow your IRA even more.  Furthermore, investing in a franchise like McDonald’s can yield more than simply owning it’s stock.  Finally, returns from gold and silver bullion will far outweigh owning stock in a miner like Newmont Mining.

Even with a self-directed IRA, there are things you cannot invest in such as collectables, life insurance, stock of an S corporation and anything involving a disqualified person.  It’s best to speak with a qualified financial adviser when setting up and utilizing a self-directed IRA.

IRA Financial Group is the market’s leading self directed IRA LLC facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including domestic or foreign real estate, tax liens, precious metals, peer-to-peer lending, new businesses, stocks, mutual funds, foreign currencies, options and much more tax-free!

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

 

 

Jan 18

Baby Boomer Business Owner Retirement Options

There are about 12 million baby boomers who own a business and about 70% of them will be retiring in the next twenty years or so.  According to John Leonetti, CEO of Pinnacle Equity Solutions, most of these owners are relying on the value of their companies to secure their retirement.  “For most small business owners, 80 or 90 percent of their personal wealth is tied up in a privately-held, illiquid business” he says. “Most of them don’t know how to take that asset and turn it into cash they can use to support themselves in retirement. And they don’t even know what they don’t know about it.”

Because of the recent struggles of the economy, many business owners have seen the value of their business drop and have been feeding more money into it.  They have been apprehensive of selling also.  However, now that the economy is starting to rebound, more owners nearing retirement are looking to sell, which is flooding the market.

While it’s starting to get late for the boomers to better plan for retirement, it may not be too late for you.  It’s best to find a qualified retirement program that fit both you and your employees’ needs.  There are three main choices when considering a plan for your small business: SEP IRA, SIMPLE IRA and Solo 401k.  Each has their own advantage and it’s best to speak with a financial adviser to see what suits your needs the best.

The Solo 401k allows you to contribute up to $51,000 for 2013 as an employer in addition to $17,500 ($23,000 if you’re at least 50 years old) as an employee of the business.  Administrative fees can add up once you reach $250,000 in assets.

The Savings Incentive Match Plan for Employees (SIMPLE) has to be started by October of the contribution year.  The contribution level is capped at $12,000 for this year.  As the owner, you must match employee contributions up to 3%.

The Simplified Employee Pension (SEP IRA) offers great flexibility.  You can make contributions up to April 15th tax deadline for the previous year and do not have to make contributions every year.  If you choose to contribute, you must contribute the same percentage of pay for each employee.  For 2013, the limit is $51,000 or 25% of compensation.

“Retirement saving is an after-thought for many small business owners,” says Gail Marks Jarvis, a syndicated financial columnist and the author of Saving for Retirement (Without Living Like a Pauper or Winning the Lottery). “So if you get to tax season and haven’t saved anything yet, the SEP IRA offers a great last minute option.”

Read more of the wealthmanagement.com article here.  If you need help deciding what plan is best for you, contact the tax experts at the IRA Financial Group who specialize in small business owners!

Jan 16

Penalty-Free Early Withdrawals

While it’s not usually a good thing to withdraw money from your retirement plan before you actually retire, sometimes you don’t have a choice.  Also, you may want to retire early and you want to get to that money as soon as possible.  Here are a few ways to get to your retirement money without have to pay a penalty.

The first option is the Substantially Equal Periodic Payment (SEPP) programs.  Setting up a SEPP will allow you to withdraw from your pre-tax IRA and 401k plans before you turn 59 1/2 without incurring a penalty.  You can start one for an IRA at any time as long as you keep it going for at least five years or until you turn 59 1/2 (whichever is longer).  You will need to pay income tax but do not face the 10% early withdrawal penalty.

If you have a Roth IRA, you are allowed to withdraw any or all of your contributions at anytime.  Earnings, however, need to stay in the account until you reach 59 1/2 or face a 10% penalty.  It’s best to avoid withdrawing money from a Roth since proper distributions are tax-free.

If you have a traditional IRA, you can convert it into a Roth.  You then have to wait five years before you can start withdrawing.  Remember that you need to pay the taxes on the money you convert, so it’s best to crunch all the numbers to make sure this is the right move for you.

If you also have a 401k through your employer and are at least 55 when you leave the job, you can then access your 401k penalty-free.  If you have a 401k from a previous employer, you can roll that over into your current 401k before leaving your job and have access to that money as well.

In conclusion, getting money out of your retirement plan before your 60th birthday can be a bit tricky so it’s best to talk with a financial adviser so you don’t suffer unneeded penalties.  The tax experts at the IRA Financial Group are waiting to hear from you.  Give them a call at 800.472.0646 or visit their website today!

Jan 14

New Self-Directed IRA Annual Contribution Limitations for 2013

Pursuant IRS news release 2012-77, the IRS has announced the 2013 limits applying to IRAs and pension plans. The Annual IRA contribution limits are changed – $5,500 (up from $5,000) if the individual is younger than age 50 in 2013, and $6,500 (up from $6,000) if he or she attains age 50 or older in 2013. With a self directed IRA, investors are now able to fund their self directed IRA investors of up to $5,500 or $6,500, if over the age of 50, to cover any investment shortfalls. The maximum SEP contribution for 2013 will increase to $51,000 from $50,000.

The annual IRA contribution limitation increase becomes even more significant when a husband and spouse are co-invested in the self directed real estate IRA structure. For example, a husband and wife over the age of 50 would be able to contribute $13,000 combined annually to their IRA LLC structure to cover any expenses or shortfalls. “The higher annual IRA contribution limits offers more incentive to investors to fund a self directed Roth IRA as well as build an Roth IRA account, “ stated Adam Bergman, a tax attorney with the IRA Financial Group.

Unlike a conventional Self Directed IRA which requires custodian consent and requires high custodian fees, a Self Directed IRA LLC with Checkbook Control will allow one to buy real estate, including rental properties by simply writing a check. With a traditional custodian controlled self directed IRA, one will have total control to make a real estate purchase, pay for improvements, and then sell the property without ever talking to the IRA custodian. Since all the IRA funds will be held at a local bank in the name of the Self Directed real estate IRA LLC, all one would need to do to engage in a house flipping transaction is write a check straight from the IRA LLC account or simply wire the funds from the IRA LLC bank account. With IRA Financial Group’s self-directed IRA LLC solution, no longer would one need to ask the IRA custodian for permission or have the IRA custodian sign the real estate transaction documents. Instead, with a Checkbook Control IRA, as manager of the IRA LLC, the IRA holder, will be able to buy rental properties simply by writing a check.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Jan 11

Is Your Child Saving for Retirement?

Many of our children are already in the work force.  With all the technology out there, it’s as expensive as ever to please your kids so more and more kids are getting jobs earlier.  These include summer jobs, weekend jobs and even mowing lawns.  As long as your child is making money, they can invest in their future.  For 2013, they can invest up to $5,500 or the amount of their earned income, whichever is less, into an IRA.

While they can invest in a traditional IRA, the better move is for them to open up a Roth IRA.  The taxes they would pay right now are going to be a lot less than in the future when they start making “real” money.  It will be hard to get your kids to invest at such a young age, so you just enlighten them with some facts.  Here are a few examples of what just three years of investing starting at 15 can turn into:

If they contribute $1,000 each year, they would have $25,000 at a 5% rate of return and $89,000 at an 8% rate when they reach 65 years of age.

If they up to $1,500, they would have $38,000 at 5% and $132,000 at 8%.

Finally, if they contribute $2,500, the 5% return would be $64,000 and $222,000 at 8%.

Obviously, the more they put in and the longer they contribute, the more they will accumulate for retirement.

There is another reasons to choose a Roth over a traditional IRA.  Any contributions made into a Roth can be withdrawn income tax and penalty-free at any time.  While it’s never good to withdraw from your retirement plan, it’s nice to have that flexibility.  If you tried that with a traditional IRA, you would owe the taxes and be hit with a 10% penalty.

It can be hard to convince your child to save his or her money so one plan may be to help him or her out.  You can match any money your child contributes.  If you’re looking to set up your child with a Roth IRA, there’s no better people to talk to than the tax experts at the IRA Financial Group.  Give us a call at 800.472.0646 or visit our website today!