The new tax law that resolved the “fiscal cliff” issue in January allows employees with a 401(k) plan at work to roll over any or all of the assets in their current plan into a Roth 401(k) plan. This is a big change, and should at least be considered by anyone who is eligible. In a traditional IRA or 401(k) plan, employees contribute pre-tax earnings to the plan. The assets grow tax-free until retirement age, at
The annual gift tax exemption has been increased to $14,000 in 2013, up from $13,000 last year. That’s due to an adjustment for inflation. This means that you can give any person $14,000 this year without any gift tax liability at all. Making annual gifts of the exemption amount is one of the best and easiest forms of estate planning, because it transfers assets from one generation to the next without any tax liability whatsoever. If
In a big surprise to many people, when Congress passed a law to resolve the “fiscal cliff” in January, it retained the large ($5 million-plus) estate, gift, and generation-skipping transfer tax exemptions that had been available in 2011 and 2012. These taxes will now be 40% of amounts over this exemption. Without this new law, the exemptions would have dropped to only $1 million at the start of 2013, with a tax rate of 55%. The
By David Beliveau People usually establish business entities to protect their personal assets from the risks of operating a business. There are several types of business entities available, and each has its own set of pros and cons. The types of business entities include sole proprietorship, partnership, Limited Liability Company (LLC), Limited Liability Partnership (LLP), Internal Revenue Code (IRC) subchapter C corporation, and IRC subchapter S corporation. The choice of business entity has both nontax and
The IRS is giving brokers extra time to start reporting the basis in debt instruments and options. This requirement had been scheduled to go into effect on January 1, 2013, but brokers and other involved parties complained to the IRS that this did not give them enough time to build and test the systems required to meet this obligation. The IRS has extended the deadline to January 1, 2014. This reporting requirement was the third phase
Health Savings Accounts (HSAs) allow taxpayers with high-deductible health insurance to set aside tax-deductible dollars that can be used tax-free to pay unreimbursed medical expenses. If you have an HSA, you’ll be able to contribute more in 2013, thanks to the inflation-adjusted limit recently announced by the IRS. The amount you can set aside in 2013 will increase to $3,250 for an individual and to $6,450 for a family. If you’re 55 or older, you’re allowed
The Affordable Care Act of 2010 included a provision requiring employers to report the cost of coverage under an employer-sponsored group health plan on the employee’s 2012 W-2. However, employers issuing fewer than 250 W-2s will not need to include the cost of health care on W-2s for 2012. For these employers, the 2012 reporting is optional. And such reporting will not apply for future calendar years until the IRS publishes further guidance.
Here’s an important reminder for small nonprofit organizations: If your organization had its tax-exempt status revoked for failing to file an annual return from 2007 through 2009, the IRS is giving you a chance to get reinstated. The IRS has issued guidance for small organizations with gross annual receipts of less than $50,000 that will allow them to regain tax-exempt status retroactive to the date of revocation. To qualify for this reinstatement and a reduced application
December 31, 2012, will be a very important date in the lives of taxpayers, because that is the date that many tax-saving provisions are set to expire. Congress has extended many of these provisions on a year-by-year basis. However, as it stands now, many tax-cutting provisions have already expired or will expire. Here are a few of the more important ones that could apply to you. Employee’s share of social security taxes. The employee’s share of
It’s important to have access to the originals of your power of attorney documents, because a photocopy sometimes won’t be accepted. Sometimes an attorney keeps the originals, and sometimes the client keeps them. Both are good ideas. But either way, make sure you can access them when you need them. If you keep them yourself, put them in a safe place. And if your attorney keeps them, be sure you leave enough time to obtain them
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