Archive for the ‘Traditional IRA’ Tag
Retirement Plans and Rollovers
Filed under: Retirement Planning | Tags: 401(k), 403(b), Roth IRA, Traditional IRA
Leave a Comment The IRS has produced a chart showing whether a rollover between 401(k), 403(b), 457(b), IRA, Roth IRA, SEP IRA and SIMPLE IRA accounts is permitted.
source: http://www.irs.gov/pub/irs-tege/rollover_chart.pdf
IRA Contribution and Deduction Phaseout Ranges by Year
Filed under: Retirement Planning | Tags: Roth IRA, Traditional IRA
Leave a Comment Legislative History of IRAs
Individual retirement accounts were introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). As the Congress originally conceived the accounts, participants could contribute up to $1,500 a year and reduce their taxable income by the amount of their contributions. Initially, ERISA restricted IRAs to workers who were not covered by a qualified employment-based retirement plan. But the 1981 Economic Recovery Tax Act allowed all taxpayers under the age of 70½ to contribute to an IRA, regardless of their coverage under a qualified plan. It also raised the maximum annual contribution to $2,000 and allowed participants to contribute $250 on behalf of a nonworking spouse. The Tax Reform Act of 1986 reversed the trend toward expanded participation by phasing out the deduction for IRA contributions among higher-earning workers who are covered by an employment-based retirement plan themselves or who have a covered spouse.
In the 1990s, the Congress raised some of the limits it had previously placed on IRA contributions and also created the Roth IRA–a new type of account that features nondeductible contributions and tax-exempt withdrawals. The Small Business Job Protection Act of 1996 raised the limit on contributions on behalf of nonworking spouses from $250 to $2,000. Further changes came in the Taxpayer Relief Act of 1997. In addition to creating Roth IRAs, it increased the income threshold above which deductible contributions are phased out and distinguished between taxpayers who are covered by an employment-based plan and those who are not but whose spouses are covered. The income thresholds for the latter category of taxpayers are now higher than those for the former, which allows more people who are not covered by an employer’s retirement plan to make tax-deductible contributions.
Additional changes to IRAs resulted from the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The law raised the limit on contributions beginning in 2002 and allowed “catch-up” contributions by people ages 50 and above. It also provided a nonrefundable credit for certain contributions to an IRA or a 401(k)-type plan. All of EGTRRA’s provisions expire after 2010. In 2006, the Congress made it easier for high-income taxpayers to contribute to Roth IRAs.
Table 1 summarizes contribution limits and phaseout ranges by year.
Permanent life insurance has become a tax shelter for the rich
10/3/2010. As reported in the Wall Street Journal permanent life insurance has the dual tax advantages since the death benefit is not subject to federal income tax and earnings in the investment-account part accrue tax-free. As a result permanent life insurance has “become a tax shelter for the rich” said Charlie Smith, a former head of an international association of insurance managers.
Some tax-policy specialists contend the provision artificially favors income in insurance policies over things like interest on bank certificates of deposit. Some also say that because the break enables people who can afford large life policies to accumulate earnings free of taxes, it gives the affluent tax advantages far beyond those available to middle-income people through a 401(k) or IRA. [read more, subscription may be required]
Have a question regarding life insurance? Ask me at allexperts.com
Paul Sid, CPA CFA
Taxes. Radical Change Coming to 1099 Reporting
Beginning in 2012, you could be facing a whole new world of 1099 paperwork.
Section 9006 of the health care bill mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. This provision is expected to generate an estimated $17 billion in revenue for the IRS over 10 years.
Currently, Form 1099 is used to document income for individual workers other than wages and salaries. For example independent contractors and consultants receive them each year from their clients annually.
The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.
What does this mean to you?
- If you sell goods or services, you’ll be getting 1099s from your customers. Previously, 1099-MISC forms were used to report payments for services. Starting in 2012, 1099s will be issued for tangible goods as well. Whether you sell plumbing supplies, office supplies, fast food, or beauty supplies, your business customers will have to report their payments to you if they spend $600 or more with you within a calendar year. This means that you need to provide your customers a completed Form W-9.
- Whether you operate as an LLC, corporation, or sole proprietorship, you’ll be getting 1099s. Previously, 1099 were not sent to corporations.
- If you purchase goods or services for your business, you will have to issue 1099′s to corporations and non-corporations. This means that you need to request completed Form W-9 from your vendors before payments are made. In my experience it is difficult to obtain completed W-9′s once payments have been made.
