Tax Planning

SBA Loans Available for COVID-19 Affected Businesses

The following information is very new and constantly changing but we wanted to provide it to you as quickly as we could. Please note the date of the post and recognize that each business is different in how this will or will not apply to them. We may not have the answers to all of your questions but we will do our best to answer how this applies to you.

We do not have the expertise or knowledge to fill out loan applications on your behalf at this time. We are able to provide necessary documentation that you may need from us if you are unable to find them in your records. We also have bank contacts that would be able to assist. Please reach out and we can pass on their information to you.

Coronavirus Emergency Loans (passed 3/27/2020)

With the passing of the CARES Act on Friday, March 27, 2020, there are some options for loan forgiveness as well for qualifying expenses. Please review the US Chamber of Commerce’s Guide and Checklist for details. This loan program is much better than the remaining information in this post.

Other SBA Loans (passed 3/6/2020)

Under the Coronavirus Preparedness and Response Supplemental Appropriations Act (the Act), small businesses that have suffered substantial economic injury as a result of COVID-19 can apply for low-interest federal disaster loans through SBA. Small businesses and nonprofits can apply for working capital loans of up to $2 million.

We’ve highlighted the following key details of the Act for you here, but you can also learn more by visiting the COVID-19 disaster assistance page on SBA’s website.

  • State governors must first request access to the Economic Injury Disaster Loan program. Once the declaration is made, information on the application process for disaster loan assistance will be made available to affected small businesses within the given state.
  • Loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits.
  • Loans can be used to cover accounts payable, debts, payroll and other bills.
  • Loans can be offered with long-term repayments in order to keep payments affordable—up to a maximum of 30 years. Terms are determined on a case-by-case basis.
  • Businesses will apply for loans online and select “Economic Injury” as the reason for seeking assistance.
  • SBA offers disaster assistance via its customer service center. If you have questions or want to check if your state is eligible, contact U.S. Small Business Administration via phone at 800.659. 2955 (TTY: 800.877.8339) or e-mail  disastercustomerservice@sba.gov.

The coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor news and keep you updated as clarification is provided.

Additional Resources

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Tax Return and Payment Deadline Pushed to July 15, 2020

The IRS has changed the tax deadline to now be July 15, 2020. This means that tax returns do not need to be submitted and payments do not need to be made until July 15th. We encourage you to still file as soon as you can. If you owe you can still wait to pay but finalizing the information and getting it into the IRS early will be critical, especially as they have slowed down as well.

If you are expecting a refund we highly encourage you to get your return filed as soon as possible. As of this posting the IRS is still issuing refunds as normal but they will become busy sending stimulus checks in the coming weeks. Below is some additional information from the IRS.

Tax Deadline Extension

Below, you will find a list of frequently asked questions in reference to the Internal Revenue Service’s (IRS) Notice 2020-18 (PDF). In this Notice, the Treasury Department and the IRS announced special Federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.

You can review the IRS page for additional information here:
https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers.

Frequently Asked Questions

Question 1: Who is eligible for relief under the Notice?

Answer: Any person with a Federal income tax return or payment due on April 15, 2020 is eligible for relief under the Notice. “Person” includes any type of taxpayer such as an individual, a trust, an estate, a corporation or any type of unincorporated business entity. The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income)—regardless of the amount owed. The return or payment must be due on April 15, 2020—this relief does not apply to Federal income tax returns and payments due on any other date.

Question 2: Do I have to actually be sick, quarantined or have any other impact from COVID-19 to qualify for payment relief?

Answer: No, you do not have to be sick, quarantined or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020 as described above.

Question 3: I am a fiscal year filer. My Federal income tax return for fiscal year 2019 is due on April 15, 2020. Am I an “Affected Taxpayer” eligible for relief under the Notice?

Answer 3: Yes, the relief provided in the Notice applies to Federal income tax returns and payments in respect of an Affected Taxpayer’s 2019 taxable year and postpones those 2019 return filings and payments due on April 15, 2020 until July 15, 2020. If your Federal income tax return for your fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the due date on extension, your due date is postponed to July 15, 2020.

Question 4: Does this relief apply to state tax liabilities?

Answer: No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

Question 5: I haven’t filed my 2019 income tax return yet (that would have been due on April 15), but I expect to file it by July 15. What do I need to do?

Answer: Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic extension of time to file as described next.

Question 6: What if I am unable to file my 2019 income tax return (that would have been due on April 15) by July 15, 2020?

Answer: If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15, 2020 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional, tax software or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.

You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.

Question 7: I already filed my 2019 income tax return (that would have been due on April 15) and I owe taxes, but I haven’t paid yet. What do I need to do to avoid interest and penalties?

Answer: To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040-SR, the tax payment amount can be found on line 23. If you filed Form 1040-NR, the tax payment amount can be found on line 75. For a corporation filing Form 1120, the tax payment amount can be found on line 35.

Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.

Question 8: I already filed my 2019 income tax return that would have been due on April 15 and scheduled a payment of taxes for April 15, 2020. Will this payment be automatically rescheduled to July 15, 2020?

Answer: No, the payment will not be automatically rescheduled to July 15, 2020. If you do nothing, the payment will be made on the date you chose. Here is information on how to cancel and reschedule your payment:

  • If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the “Look Up a Payment” feature. You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
  • If you scheduled a payment through the Electronic Federal Tax Payment System (EFTPS), click on “Payments” from the EFTPS home page, login, click “Cancel a Tax Payment” from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment date.
  • If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at 888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
  • If you scheduled a payment by credit card or debit card, contact the card processor to cancel the payment.

Question 9: The Notice postpones the deadline for first quarter 2020 estimated income tax payments due on April 15, 2020. What about second quarter estimated tax payments due on June 15? Have they been postponed as well?

Answer: No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.

Question 10: Does this relief provide me more time to contribute money to my IRA for 2019?Answer: Yes. Contributions can be made to your IRA for a particular year at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, 2020, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A – Contributions to Individual Retirement Arrangements (IRAs).

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New Sick Pay and Medical Leave Requirements Due to COVID-19

The following information is very new and constantly changing but we wanted to provide it to you as quickly as we could. Please note the date of the post and recognize that each business is different in how this will or will not apply to them. We may not have the answers to all of your questions but we will do our best to answer how this applies to you.

Family and Medical Leave Act (FMLA) expanded to provide relief to those affected by COVID-19

“The Families First Coronavirus Response Act” (FFCRA), which goes into effect April 1, 2020 and expires December 31, 2020, responds to the coronavirus outbreak by providing additional assistance in the areas of COVID-19 testing, sick leave, food assistance, and more. We’ve compiled key details of FFCRA that we believe you need to know.

The following items are mandatory unless you believe it will “jeopardize the viability of the business is a growing concern”.  You may apply for an exemption, but the Department of Labor has yet to provide details of how this exemption process will work and who qualifies.

In summary, the Act:

  • Requires employers to provide emergency paid sick leave to workers affected by COVID-19
  • Expands family and medical leave (FMLA) for employees that are required to care for children out of school or daycare.
  • Offers increased funding for state unemployment insurance, food stamp and nutritional programs.

More specifically, here’s what The Families First Coronavirus Response Act means for both business owners and employees in the areas of sick leave and expanded family and medical leave.

  • Emergency paid sick leave:
    • Employees are eligible for up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine or school closures.
    • Applies to employers with fewer than 500 employees
    • All employees no matter the length of employment (some exclusions may apply)
  • FMLA expansion covers:
    • Employees are eligible for up to 12 weeks of FMLA leave for school closures (2 weeks unpaid and then up to 10 weeks at 2/3 pay).
    • Employers with fewer than 500 employees
    • Employees who have been employed for at least 30 calendar days (some exclusions may apply)
    • Employees who must care for children under the age of 18 in the event of school and place-of-care closures or if care provider is unavailable due to a public health emergency with respect to COVID-19.

Qualifying Reasons for Leave related to COVID-19

  1.  Is subject to Federal, State or local quarantine or isolation order related to COVID-19
  2. Has been advised by a health care provider to self-quarantine related to COVID-19
  3. Is experiencing COVID-19 Symptoms and is seeking medical diagnosis
  4. Is caring for an individual subject to an order described in number 1 or 2 above. (Does not have to be a family member.)
  5. Is caring for his or her child whose school or place of care is closed (or child care provider is unavailable due to COVID-19 related reasons

Is experiencing any other substantially similar condition specified by the US Department of Health and Human Services.

Additional Resources

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2018 Tax Reform

What the Tax Reform Act Means for You

Congress has passed a tax reform act that will take effect in 2018, ushering in some of the most significant tax changes in three decades. There are a lot of changes in the new act, which was signed into law on Dec. 22, 2017.

You can use this memo as a high-level overview of some of the most significant items in the new act. Because major tax reform like this happens so seldom, we recommend you schedule a tax-planning consultation to ensure you reap the most tax savings possible during 2018. 

Key changes for individuals:

Here are some of the key items in the tax reform act that affect individuals:

  • Reduces income tax brackets: The act retains seven brackets, but at reduced rates, with the highest tax bracket dropping to 37 percent from 39.6 percent. The individual income brackets are also expanded to expose more income to lower rates (see charts below).
  • Doubles standard deductions: The standard deduction nearly doubles to $12,000 for single filers and $24,000 for married filing jointly. To help cover the cost, personal exemptions and most additional standard deductions are suspended.
  • Limits itemized deductions: Many itemized deductions are no longer available, or are now limited. Here are some of the major examples:
    • Caps state and local tax deductions: State and local tax deductions are limited to $10,000 total for all property, income and sales taxes.
    • Caps mortgage interest deductions: For new acquisition indebtedness, mortgage interest will be deductible on indebtedness of no more than $750,000. Existing mortgages are unaffected by the new cap as the new limits go into place for acquisition indebtedness after Dec. 14, 2017. The act also suspends the deductibility of interest on home equity debt.
    • No more 2 percent miscellaneous deductions: Most miscellaneous deductions subject to the 2 percent of adjusted gross income threshold are now gone.

Tip: If you’re used to itemizing your return, that may change in coming years as the doubled standard deduction and reduced deductions make itemizing less attractive. To the extent you can, make any remaining itemizable expenditures before the end of 2017.

  • Cuts some above-the-line deductions: Moving expense deductions get eliminated except for active-duty military personnel, along with alimony deductions beginning in 2019.
  • Weakens the alternative minimum tax (AMT): The act retains the alternative minimum tax but changes the exemption to $109,400 for joint filers and increases the phaseout threshold to $1 million. The changes mean the AMT will affect far fewer people than before.
  • Bumps up child tax credit, adds family tax credit: The child tax credit increases to $2,000 from $1,000, with $1,400 of it being refundable even if no tax is owed. The phaseout threshold increases sharply to $400,000 from $110,000 for joint filers, making it available to more taxpayers. Also, dependents ineligible for the child tax credit can qualify for a new $500-per-person family tax credit.
  • Doubles estate tax exemption: Estate taxes will apply to even fewer people, with the exemption doubled to $11.2 million ($22.4 million for married couples).

What stays the same for individuals:

  • Itemized charitable deductions: Remain largely the same.
  • Itemized medical expense deductions: Remain largely the same. The deduction threshold drops back to 7.5 percent of adjusted gross income for 2017 and 2018, but reverts to 10 percent in the following years.
  • Some above-the-line deductions: Remain the same, including $250 of educator expenses and $2,500 of qualified student loan interest.
  • Gift tax deduction: Remains and increases to $15,000 from $14,000 for 2018.

Farewell to the healthcare individual mandate penalty

One of the changes in the tax act is the suspension of the individual mandate penalty in the Affordable Care Act (also known as “Obamacare”). The penalty is set to zero starting in 2019, but remains in place for 2018 and prior years.

Tip: Retain your Form 1095s, which will provide evidence of your healthcare coverage. Without it, you may have to pay the individual mandate penalty, which is the higher of $695 or 2.5 percent of income. Beginning in 2019, this penalty is set to zero.

NOTICE: The IRS recently granted employers and health care providers a 30-day filing extension for Forms 1095-B and 1095-C, to March 2, 2018. The IRS clarified that taxpayers are not required to wait until receipt of these forms to file their taxes.

 

New 2018 tax bracket structures for individuals

Single taxpayer

Taxable income over But not over Is taxed at
$0 $9,525 10%
$9,525 $38,700 12%
$38,700 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $500,000 35%
$500,000   37%

Head of household

Taxable income over But not over Is taxed at
$0 $13,600 10%
$13,600 $51,800 12%
$51,800 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $500,000 35%
$500,000   37%

 

Married filing jointly

Taxable income over But not over Is taxed at
$0 $19,050 10%
$19,050 $77,400 12%
$77,400 $165,000 22%
$165,000 $315,000 24%
$315,000 $400,000 32%
$400,000 $600,000 35%
$600,000   37%

 

Married filing separately

Taxable income over But not over Is taxed at
$0 $9,525 10%
$9,525 $38,700 12%
$38,700 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%
$200,000 $300,000 35%
$300,000   37%

 

Estates and trusts

Taxable income over But not over Is taxed at
$0 $2,550 10%
$2,550 $9,150 24%
$9,150 $12,500 35%
$12,500   37%

This brief summary of the tax reform act is provided for your information. Any major financial decisions or tax-planning activities in light of this new legislation should be considered with the advice of a tax professional. Call if you have questions regarding your particular situation. Feel free to share this memo with those you think may benefit from it.

Information from Knutte & Associates, Tax Reform Newsletter 12-28-17 was used in this blog post.

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Keeping Savings on Track with a Spousal IRA

Keeping Savings on Track with a Spousal IRA

Being a stay-at-home mom or dad, or working part-time to help take care of the children, can make a big contribution to the balance and well-being of a family. Unfortunately, time out of the workforce could put the caregiving spouse at a disadvantage when it comes to retirement savings. A spousal IRA – funded for a spouse who earns little or no income – offers an opportunity to help keep the retirement savings of both spouses on track. It also offers a larger potential tax deduction for a married couple.

Making Contributions

For the 2017 tax year, an individual with earned income (from wages or self-employment) can contribute up to $5,500 to his or her own IRA and up to $5,500 more to a spouse’s IRA- regardless of whether the spouse works or not – as long as the couple’s combined earned income exceeds both contributions and they file a joint tax return. An additional $1,000 catch-up contribution can be made for each spouse who is age 50 or older. Contributions for 2017 can be made up to the April 2018 tax filing deadline. All other IRA eligibility rules must be met.

Income Phaseouts

If neither spouse actively participates in an employer-sponsored retirement plan, contributions to a traditional IRA are fully tax deductible. However, if one or both are active participants, tax deductibility for joint filers phases out at a modified adjusted gross income (MAGI) of $99,000 to $119,000 for a participating spouse and $186,000 to $196,000 for a nonparticipating spouse (in 2017). Thus, some participants in workplace plans who earn too much to deduct an IRA contribution for themselves may still be able to deduct an IRA contribution for a nonparticipating spouse. Contributions to a Roth IRA are not tax deductible and are not affected by participation in a workplace plan. However, eligibility to contribute to a Roth IRA phases out for joint filers with a MAGI of $186,000 to $196,000 (in 2017). Distributions from traditional IRAs are taxed as ordinary income and may be subject to a 10% federal income tax penalty if withdrawn prior to age 59 ½ . Roth IRA contributions can be withdrawn penalty-free and tax-free at any time, but in order for earnings to qualify for a tax-free and penalty-free withdrawal, a Roth IRA distribution must meet the five-year holding requirement and take place after age 59 ½. (There are IRS exceptions to the early withdrawal penalty and the five-year holding requirement.)

Talk to one of the Professionals at Fox Peterson to learn about how to take advantage of this opportunity. Information from Cambridge Financial Services was used in this blog post.

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Retirement Plan Contribution Limits for 2018

Retirement Plan Contribution Limits for 2018

The Internal Revenue Service issued the annual cost of living adjustments Thursday for 401(k) contributions, pension plans and other retirement-related matters.

The contribution limit for workers who are enrolled in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has grown from $18,000 to $18,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements, to contribute to Roth IRAs and to claim the saver’s credit have also increased for 2018.

Taxpayers are able to deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or their spouse was covered by a retirement plan at work over the course of the year, the deduction could be reduced, or phased out, until it’s eliminated, depending on their filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction don’t apply.)

Here are the phase-out ranges for 2018:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range goes from $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples who file jointly, where the spouse making the IRA contribution is covered by a retirement plan at work, the phase-out ranges from $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who isn’t covered by a workplace retirement plan and is married to a spouse who is covered, the deduction is phased out if the couple’s income ranges between $189,000 and $199,000, up from $186,000 and $196,000.
  • For a married taxpayer filing a separate return who’s covered by a retirement plan at work, the phase-out range isn’t subject to an annual cost-of-living adjustment and remains $0 to $10,000.

 

The income phase-out range for taxpayers making contributions to a Roth IRA goes from $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples who file jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also referred to as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.

Some limitations are unchanged from 2017:

  • The limit on annual contributions to an IRA stays unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over isn’t subject to an annual cost-of-living adjustment and remains $1,000.
  • The catch-up contribution limit for employees ages 50 and over who contribute to 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

 

Information from Accounting Today was used in this blog post. For more details and technical guidance, see Notice 2017-64. Contact the professionals at Fox Peterson for tax planning and to learn more about how these rules affect your taxes.

 

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Debt Cancellation May be Taxable

Debt Cancellation May be Taxable

If a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Here are 10 tips about debt cancellation:

  1. Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be able to exclude the canceled amount from their income. They must have used the loan to buy, build or substantially improve their main home to qualify. Their main home must also secure the mortgage.
  2. Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income. They may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt canceled in a foreclosure.
  3. Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage. This applies only if the taxpayer used proceeds from the refinancing to buy, build or substantially improve their main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
  4. Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of canceled debts to be nontaxable.
  5. Form 1099-C. If a lender reduced or canceled at least $600 of a taxpayer’s debt, the taxpayer should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of canceled debt and other information.
  6. Form 982. If a taxpayer qualifies, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. They should file the form with their income tax return.
  7. Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.

 

Information from IRS Tax Tip 2017-23 was used in this blog post

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Do I Need a Living Trust?

Do I Need a Living Trust?

Assets placed in a revocable living trust go directly to your heirs when you die, bypassing the sometimes lengthy and costly process of probate. living-trustsThat can make a living trust a valuable estate planning tool if, for example, you plan to disinherit one of your children or leave unequal amounts to your heirs. If your estate goes through probate, heirs can go to court to contest the terms of your will. If you own a vacation home or other property in another state, a living trust can let you avoid having to go through probate in two states. You normally name yourself trustee and retain the authority to manage property in the trust. You must also name a successor trustee to handle the distribution of assets after you die. The cost to set up a living trust varies depending on your location, but it typically ranges from $1,000 to $1,500 for an individual or $1,200 to $2,500 for a married couple.

Fox Peterson has a number of qualified estate attorneys we can refer to.

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2015 IRA Contribution Facts

2015 IRA Contribution Facts

Did you contribute to an Individual Retirement Arrangement last year? Are you thinking about contributing to your IRA now? If so, you may have questions about IRAs and your taxes. Here are some IRS tax tips about saving for retirement using an IRA:

  • Age Rules. You must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA. There is no age IRA-Contributionslimit to contribute to a Roth IRA.
  • Compensation Rules. You must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If you are married and file a joint tax return, only one spouse needs to have compensation in most cases.
  • When to Contribute. You can contribute to an IRA at any time during the year. To count for 2015, you must contribute by the due date of your tax return. This does not include extensions. This means most people must contribute by April 18, 2016. If you contribute between Jan. 1 and April 18, make sure your plan sponsor applies it to the year you choose (2015 or 2016).
  • Contribution Limits. In general, the most you can contribute to your IRA for 2015 is the smaller of either your taxable compensation for the year or $5,500. If you were age 50 or older at the end of 2015, the maximum you can contribute increases to $6,500. If you contribute more than these limits, an additional tax will apply. The additional tax is six percent of the excess amount contributed that is in your account at the end of the year.
  • Taxability Rules. You normally don’t pay income tax on funds in your traditional IRA until you start taking distributions from it. Qualified Savers Creditdistributions from a Roth IRA are tax-free.
  • Deductibility Rules. You may be able to deduct some or all of your contributions to your traditional IRA. See IRS Publication 590-A for more.
  • Saver’s Credit. If you contribute to an IRA you may also qualify for the Saver’s Credit. It can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.
  • New myRA. If your employer does not offer a retirement plan, you may want to consider myRA. It is a new retirement savings plan offered by the U.S. Department of the Treasury. It’s safe and affordable. You can also direct deposit your entire refund or a portion of it into an existing myRA – Retirement Account.

Information from IRA Tax Tip 2016-39 was used in this blog post.

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2015 Tax Organizer

2015 Tax Organizer

The 2015 Fox Peterson tax organizer is now available in two forms. You can A) go to our resources page and fill out the organizer(s) that apply to you and submit them directly to your tax preparer or B) click here to download and print the PDF version.

A customized organizer is also available. Please email or call your tax preparer to request yours.Fox Logo

These resources are meant to be used as a tool to help taxpayers prepare for the upcoming tax season.

As always, if you have any questions you can call Fox Peterson at 480-898-7640

Happy new year!

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