Retirement

Retirement

Tax obligation

Someone wants to withdraw a chunk of his retirement from his union job. He wants to buy a piece of farm equipment and right it off. The farm is a family business I told him he needs to pay tax on his retirement no matter what he spends the money on. Does he need to pay taxes on funds withdrawn from his annuity.

Retirement

IRA Rollover Once Yearly Question

I have an old retirement plan that I want to rollover into my preferred IRA accounts. The account was split into a Traditional IRA and a Roth IRA. I just requested that the Traditional IRA portion be rolled over into a Traditional account. Would requesting the Roth portion to be rolled over into a separate Roth account be in violation of the single IRA rollover per year rule?

Retirement

withdraw mistaken IRA after tax contributions

I mistakenly had a direct deposit go to my IRA account. This would be an after-tax contribution to an account that otherwise has all pre-tax contributions. Is it possible to remove just this deposit?

CPA Answer:

Yes remove this deposit from your IRA account, you will be over the limit and have to pay a penalty to the IRS.  Talk to your financial advisor as to how to go about doing this.  Keep a detailed record of the money going in and the money coming out.  This needs to be done by year-end

Answer Provided by: Jeanne Adams

Retirement

How to fix an excess contribution to a SEP IRA

In '25, I contributed too much to my personal SEP IRA for '24. I had part of the excess recharacterized as a trad. IRA contrib for '25 and am using a form to withdraw the remaining excess. All seems clear except I have to choose a correction method- IRC404(h) or EPCRS. Which do I choose? What happens if I choose incorrectly? Will there be other documents or forms required later depending on my choice? (I filed for an extension for '24 taxes. I will not have any self-employment income in '25.)

Retirement

Backdoor IRA

Hello, I am from CA state. I have 401k from the job. roth IRA income limits do not allow me to contribute directly to the roth IRA. Is it ok for me to open Traditional IRA, contribute after-tax money ($6000 limit) into it and transfer them to the Roth IRA. I do not have any other IRA accounts. only 401K and company RETIREMENT SAVINGS PLAN (not contribution from me into this account).

CPA Answer:

Yes the backdoor IRA strategy will work for you. One note of caution is that there is potential this strategy will be limited if the version of the Build Back Better Act that is about to go to the Senate for a vote passes. Consider making the move soon as some of those provisions will take effect Jan of 2022.

Additionally note that there is a possibility of the side door Roth if your plan at work allows non deductible 401k Contributions. Reach out if you want to discuss further

Answer Provided by: David Huff

Social Security

Earnings limit for T/P's under full retirement age

CPA Answer:

Recipients under the full retirement age can earn up to $15,720 between the ages of 62 and 65. people who turn 66 in 2016 will not loose any benefits if they earn $41,880 or less before they reach that age.
Recipients under the full retirement age can earn up to $16,920 between the ages of 62 and 65. people who turn 66 in 2017 will not loose any benefits if they earn $44,880 or less before they reach that age.

Answer Provided by: CPAdirectory

Social Security

Social Security wage base

CPA Answer:

In 2016, there is no increase in the Social Security wage base of $118,500. The Social Security tax rate on employers and employees stays at 6.2%. The Medicare tax rate on employers and employees stays at 1.45% on all pay. BUT...
In 2017, the Social Security wage base is raised to $127,200. The maximum amount of Social Security tax a taxpayer will pay in 2017 will increase from $7,347 in 2016 to $7,886.40 in 2017. An increase of $539.40.
in 2017, the Social Security tax rate on employers and employees stays at 6.2%. The Medicare tax rate on employers and employees stays at 1.45% on all pay.

Answer Provided by: CPAdirectory

Retirement Planning

Deadline to set up Retirement Plan

CPA Answer:

IRA (Traditional or Roth) Deadline to establish the plan and the Deadline to fund the plan is April 15th of the following year.
SEP IRA - Deadline to establish the plan is the due date of the tax return, including extensions and the Deadline to fund the plan is due date of the tax return, including extensions.
Simple IRA - Deadline to establish the plan is October 1st of that year and the Deadline to fund the plan for the Employee contributions must be withheld from pay by December 31st and remitted to the investment firm as soon as reasonably possible and the Employer contribution must be made by the tax return due date, including extensions.
401-K or 403(b)- Deadline to establish the plan is October 1st of that year for safe harbor plans, otherwise December 31st of that year. Deadline to fund the plan for the Employee contributions must be withheld from pay by December 31st and remitted to the investment firm as soon as reasonably possible and the Employer contribution must be made by the tax return due date, including extensions.
Defined Benefit Plans and Profit Sharing Plans and Keough Plans must be set up by Dec 31st of that tax year.

Answer Provided by: CPAdirectory

Social Security

Social Security - Mailing of Paper checks to end

CPA Answer:

On March 1, 2013, the Treasury department will stop mailing paper checks to Social Security recipients. Retirees will be required to choose to have their Social Security payments either directly deposited into a bank or credit union account or loaded onto a prepaid Direct Express Debit MasterCard.
New Social Security beneficiaries have been required to choose an electronic payment option since May 2011, and approximately 93 % of Social Security and Supplemental Security Income payments are already being made electronically.

Answer Provided by: CPAdirectory