12 IRS Tax Tools

IRS Tax ToolsDid you know there are free IRS Tax Tools that can help minimize your tax bill and manage your taxes all year round? Most taxpayers are unaware of them. The are located on their website.

Here are a 12 of the best IRS tax tools including links.

1.  IRS Audit Technique Guides

These are the same guides that IRS tax examiners use when conducting an audit. The Freedom of Information Act require the IRS to provide these audit guides

These guides can be very helpful in aligning your 2017 tax return with audit guidelines. It can also help you eliminate audit risk by having better knowledge of the law and IRS rules and procedures.

More than 50 audit guides are available on the IRS web site for free download. They cover topics including: Executive Compensation, Lawsuit Awards and Settlements, Business Consultants, Architects, Attorneys, Cash Intensive Businesses, Golden Parachutes, Split Dollar Life Insurance, Veterinary Medicine, the Wine Industry, and dozens more.

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5 Roth IRA Facts

Roth IRA FactsDo you think you understand all the rules that govern your Roth IRA? Not so fast! There are many misconceptions as to how these complicated accounts work. Here are 5 Roth IRA facts that might surprise you:

1.  You are never too old to contribute. If you have earned income and your modified adjusted gross income is below a certain level, you can contribute to a Roth IRA. Your age does not matter. This often comes as a surprise to taxpayers because you cannot contribute to a traditional IRA once you reach the year you turn 70 ½. Roth IRAs are different. Age is never a barrier to making tax year contributions.

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Bitcoin as an IRA Investment: 6 Things to Know

Here are six things to know about investing IRA funds in Bitcoin.

BitcoinBitcoin is receiving a surge of publicity as a possible IRA investment, and a number of new firms have recently started targeting the “Bitcoin IRA” market.

1.  There is no such thing as a “Bitcoin IRA.” Although the term is often seen in the media and advertising, there is no such thing any more than there are “stock market IRAs.” Legally, a “Bitcoin IRA” is simply an IRA like any other, except that its custodian permits investments in Bitcoin.

2.  Bitcoin is not an “IRS Approved” investment.  This claim is frequently made in advertising, but the IRS does not approve investments.  In fact, the IRS has issued a notice specifically to IRA owners headlined “The IRS Does Not Approve IRA Investments” and warning against what it calls the “Fraudulent ‘IRA Approved’ Sales Pitch.”

IRAs can invest in Bitcoin simply because they are allowed to invest in almost anything except collectibles and life insurance. When the term “IRS Approved” misleadingly implies some sort of endorsement, it may cast doubt on the bona fides of the party making the claim. The IRS warns: “Avoid any investment touted as ‘IRA Approved’ or otherwise endorsed by the IRS.”

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Tax Liabilities for Underpayments, Penalties, & Interest: Relief for the “Innocent” Spouse

tax liabilitiesIn many households, married couples divvy up the responsibilities; one will handle the bills and banking while the other cooks and does the grocery shopping, or one will do the laundry while the other manages the yard work and house. This split often extends to annual income tax responsibilities, even in couples who use a professional preparer. However, when couples submit joint returns, both are jointly and severally liable for the information included in the return. That means if there’s an underpayment, both spouses are going to be liable for the debt.

The tax code does provide means by which a spouse can be relieved of this joint and several obligation. As you can imagine, these exceptions are technical and very fact specific. Recently, the U.S. Tax Court issued two rulings on one of those exceptions; the relief for the innocent spouse. In one case, relief was granted; in the other, relief was denied. What separated these cases?

Essentially, what separated these cases was the IRS’s ability to prove that the spouse requesting relief had actual knowledge, or should have known, that a misrepresentation was being made. In the first case, the couple separated in 2014 and divorced in 2016. The return at issue was filed in 2014 and did not include an IRA distribution that was deposited into their joint checking account. Although they were living separately at the time, the couple continued to use a joint checking account for all purposes until their eventual divorce. Both had access to this account and regularly made transactions from the account. For tax purposes, they sent their information separately to a third-party preparer. However, the ex-wife was generally responsible for any information related to her inherited IRA.

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Tax Law Updates to 529 Educational Plans

529 Educational Plans Should Be Gaining in Popularity

529 Educational PlansNow that the dust has settled and the tax code has been “reformed,” it’s time to unpack those changes and analyze how best they can help you. One of the changes was the expansion of 529 educational plans. Under the Tax Cuts and Jobs Act, eligible expenses include up to $10,000 per person per year for K-12 educational expenses. Given the popularity and rising costs of private education, and the state income tax breaks associated with many of these accounts, 529 educational plans should see a spike in popularity.

529 Plans – A Quick Overview

529 plans were created by Congress in the mid 1990s as way for families to save money for college education expenses, which at that time had just begun to skyrocket. There are two types of 529 plans: a prepaid plan and a savings plan. We will focus on the savings plans because they are most prevalent. If you understand how a Roth IRA works, you should have a pretty good idea of how a 529 savings plan works. A 529 plan is an investment account funded with after-tax money. The earnings grow tax-free and the withdrawals are tax and penalty free as long as they are qualified. Even better, some states provide state income tax deductions for contributions! Currently, 34 states offer some type of deduction or credit for 529 plan contributions.

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Roth IRAs Favored for Annual Contributions, Neglected for Rollovers from Company Plans

Roth IRAsRoth IRAs become 20 years old in January of 2018 and now hold more than $660 billion in retirement wealth, reports the Investment Company Institute (the source of the data in this article). 

Yet while Roth IRAs have become very popular among individuals who make annual contributions to IRAs, they are near totally avoided by persons who roll over big-dollar distributions from company retirement plans into their IRAs, with these funds going overwhelmingly into Traditional IRAs.

This suggests that some people are undervaluing the benefits of making a rollover into a Roth IRA. If you are an individual with funds to roll over, it may pay to re-examine the benefits of choosing a Roth IRA to be the destination of a big-dollar rollover.

IRA Snapshots

Contributions to Roth IRAs exceeded those to Traditional IRAs by $21.9 billion to $17.5 billion in 2014, even though only about one-third of IRA owners have a Roth.  Yet Traditional IRAs now hold near $7 trillion in assets, dwarfing the total in Roths. The main reason is that rollovers of large balances from employer plans flow overwhelmingly into Traditional IRAs. Rollovers totaled $423.9 billion into Traditional IRAs versus a mere $5.7 billion into Roth IRAs in 2014 – Traditional IRAs received 98% of rollovers.

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10 Things to Know About the Still-Working Exception

By Sarah Brenner, JD
IRA Analyst with Ed Slott

Still-Working Exception

Are you approaching retirement age and not looking forward to being forced to take unwanted required minimum distributions (RMDs) from your retirement account? You may be looking for a way to delay those distributions. You may have heard about the still-working exception, which can allow RMDs to be put off. Will this exception help you? Here are 10 things you need to know.

1.  The still-working exception does not apply to IRAs. It only applies to company plans. If you are still working, that can’t help you delay RMDs from your IRA.

2.  The exception will only apply to the plan of the company for which you are still working. If you have other funds in other company plans it won’t help you with those.

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The Importance of Financial Certifications

Financial certifications are a commitment to the client’s best interest

Financial certificationsYou’ve decided to get serious about your financial future and want to find a financial advisor to guide your decisions. There’s a lot to consider in creating a comprehensive financial plan.

Pulling all the pieces of your financial life together—budgeting, retirement planning, saving for education, insurance, taxes, and investing—is a challenging endeavor.

Finding credentialed professionals is essential. Many professionals call themselves financial planners and most people think all financial advisors are “certified,” but this isn’t true. Only those that have fulfilled and maintained the requirements of the CFP Board can display the CFP® trademark and call themselves a CERTIFIED FINANCIAL PLANNER™.

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Calculating Social Security Benefits

Calculating Social Security Benefits are a function
of three primary factors.

How Many Years Have You Worked?Calculating Social Security Benefits

The Social Security Administration uses 35 years of earning history

▶ If you worked more than 35 years – it uses the highest 35 years of salary

▶ If you worked less than 35 years – it still uses 35 years of salary (the years you didn’t work count as $0) This rule impacts far more women than men.

Why? Many women took significant time away from work to raise one or more of their children. 

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