2013 COLAs for Retirement Plans

by Michael Popeck 7. November 2012 09:13
Each year, the IRS announces cost-of-living adjustments affecting limitations for pension plans and other retirement-related items. For 2013, many of the statutory thresholds that trigger increases in the cost-of-living index were met, while other limitations will remain unchanged. Some of the key highlights include the elective deferral (contribution) limit for employees that participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increased from $17,000 to $17,500; catch-up contribution limit for employees aged 50 and over in 401(k), 403(b), most 457 plans and Thrift Savings Plan remains unchanged; Individual Retirement Arrangement (IRA) limit increases from $5,000 to $5,500, among other important changes. You can see the full list of changes in the chart below. If you have any question regarding any possible changes to your retirement plan contact a Urish Popeck retirement plan specialist, or take a look at how we can help you successfully manage your retirement plan. Code Section 2013 2012 2011 2010 401(a)(17)/404(l) Annual Compensation        $255,000        $250,000        $245,000        $245,000 402(g)(1) Elective Deferrals          17,500          17,000          16,500          16,500 408(k)(2)(C) SEP Minimum Compensation                550                550                550                550 408(k)(3)(C) SEP Maximum Compensation        255,000        250,000        245,000        245,000 408(p)(2)(E) SIMPLE Maximum Contributions          12,000          11,500          11,500          11,500 409(o)(1)(C) ESOP Limits  1,035,000 205,000  1,015,000 200,000  985,000 195,000  985,000 195,000 414(q)(1)(B) HCE Threshold        115,000        115,000        110,000        110,000 414(v)(2)(B)(i) Catch-up Contributions             5,500             5,500             5,500             5,500 414(v)(2)(B)(ii) Catch-up Contributions             2,500             2,500             2,500             2,500 415(b)(1)(A) DB Limits        205,000        200,000        195,000        195,000 415(c)(1)(A) DC Limits          51,000          50,000          49,000          49,000 416(i)(1)(A)(i) Key Employee        165,000        165,000        160,000        160,000 457(e)(15) Deferral Limits          17,500          17,000          16,500          16,500 1.61-21(f)(5)(i) Control Employee        100,000        100,000          95,000          95,000 1.61-21(f)(5)(iii) Control Employee        205,000        205,000        195,000        195,000 219(b)(5)(A) IRA Contribution Limit             5,500             5,000             5,000             5,000 219(b)(5)(B) IRA Catch-up Contributions             1,000             1,000             1,000             1,000 Taxable Wage Base for Social Security        113,700        110,100        106,800        106,800
Categories: Advisory

Never Too Young to Consider Retirement - Contributing to a Child’s IRA

by Michael Popeck 23. July 2012 14:00
Establishing an individual retirement account (IRA) in a child’s name can be an effective planning technique for a child with earned income.  The usual IRA rules and limitations apply.  Thus, for 2012 a child must have legitimate self-employment or wage/salary income, and the annual IRA contribution cannot  exceed the lesser of $5,000 or 100% of earned income.  The key to contributing to an IRA is that the child receive earned income. Visit the AICPA’s Case Study to read more about the findings in the case study.
Categories: Advisory

IRS Enforcement Efforts Escalate

by Rocco Romano 18. November 2011 14:14
Look out if you owe the IRS.  The Internal Revenue Service has hired new and vigorous revenue officers who have been given the green light to go to people’s homes and businesses.  Treasury Secretary Timothy Geithner says the IRS will be more forceful in collecting back taxes and prosecuting Americans accused of tax evasion. This cautionary sentiment  comes as a result of both the Obama administration and U.S. lawmakers recognizing  that current economic conditions will probably result in less revenue collected from taxpayers, considering the high unemployment and more than half the population not paying income tax. According to the IRS,  tax debt which includes unpaid taxes, penalty and interest charges, totaled $300 billion at the end of the fiscal year.  The Internal Revenue Service has a process for collecting unpaid tax debts by notifying taxpayers through notices, telephone calls, and in person. That process is set to escalate, as the IRS plans to be more proactive than ever before. 
Categories: Tax

IRA Owners and Advisors: Take a Final Look at Roth Conversions before 10-17-11

by Rocco Romano 4. October 2011 11:23
IRA OWNERS AND ADVISORS: TAKE A FINAL LOOK AT ROTH CONVERSIONS BEFORE 10-17-11   Many taxpayers who were willing to pay income taxes on their retirement funds at 2010 rates (or under the special installment rules allowed) in exchange for tax-free future earnings, converted their traditional individual retirement account (“IRA”) to a Roth IRA. Each of these 2010 conversions should be closely scrutinized to ensure that the taxable amount on the conversion does not exceed the current fair market value of the account. A market decline gives taxpayers a chance to convert a traditional IRA or investments in a qualified plan to a Roth IRA at a much lower tax cost than would have been possible when stock market values were higher. Taxpayers who have already converted also have the chance to take advantage of the lower tax cost provided they take action on or before October 17, 2011.     RECHARACTERIZING A ROTH CONVERSION BACK TO A REGULAR IRA If the investments have declined in value since the conversion, the tax bill will be artificially high unless the market recovers quickly. In order to avoid paying income taxes on value that no longer exists, the taxpayer can recharacterize a Roth conversion that took place in 2010 and treat it as if it had never occurred. This process involves transferring the converted amount (plus earnings or minus losses) from the Roth IRA to a traditional IRA via a direct, trustee-to-trustee transfer. For example, a taxpayer converts a traditional IRA invested in a stock fund to a Roth IRA invested in the same stock fund in March 2010. At the time of the conversion, the regular IRA had a $50,000 balance, all of which is attributable to deductible contributions and their earnings. The taxpayer’s Roth IRA is currently worth only $40,000. To avoid paying tax on the March 2010 conversion value that includes $10,000 of lost value, the Roth IRA can be recharacterized on or before October 17, 2011, as a traditional IRA. (This date is effectively the extended due date for 2010 individual tax returns, as October 15, 2011, is a Saturday.) The easiest way to make a recharacterization is to do so before filing the income tax return affected by the Roth conversion. Thus, if an individual taxpayer has extended and not yet filed the 2010 return, the return should simply report both the Roth conversion and recharacterization in order to produce a net effect on taxable income of zero. Taxpayers who have already filed their 2010 income tax return and paid taxes on the Roth conversion are not precluded from recharacterizing the conversion by October 17, 2011.1 If a 2010 conversion is recharacterized after the taxpayer timely filed the 2010 return, an amended return should be filed to reflect the recharacterization2 and to receive a refund of taxes paid.   RECONVERTING TO A ROTH IRA If the Roth IRA continues to be the desired retirement vehicle, the recharacterized funds can be returned to a Roth IRA after a specified waiting period. The reconversion cannot be made before the later of: 1. The beginning of the taxable year following the taxable year in which the amount was converted to a Roth IRA; or 2. The end of the 30-day period beginning on the day on which the IRA owner transfers the amount from the Roth IRA back to a traditional IRA by recharacterization. This limitation applies whether the recharacterization occurs during the taxable year in which the amount was converted to a Roth IRA or the following taxable year. Assuming, for example, that a Roth IRA was recharacterized as a regular IRA on October 17, 2011, the earliest date the funds could be reconverted to a Roth IRA would be November 17, 2011.
Categories: Tax