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William Byrnes (Texas A&M) tax & compliance articles

Archive for the ‘Retirement Planning’ Category

Byrnes & Bloink’s TaxFacts Intelligence Weekly – Actionable Analysis for Financial Advisors

Posted by William Byrnes on November 9, 2019


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

199A Rental Real Estate Safe Harbor Excludes Certain Businesses

Not all taxpayers will be able to take advantage of the Section 199A safe harbor for rental real estate. While the safe harbor does apply to residential rental real estate, taxpayers are not entitled to rely upon the safe harbor if the taxpayer uses the property as a residence during the tax year. Notably, if the real estate is rented or leased under a triple net lease, the safe harbor remains unavailable under the final rule. When satisfying the “hours of rental real estate services” criteria, only certain activities are counted toward the 250-hour threshold. Activities such as rent collection, advertising the rental, property maintenance, negotiating leases and managing the real property generally count toward the threshold. However, the taxpayer’s activities as an “investor” are not counted. Similarly, if any property within the rental real estate enterprise is classified as a specified service trade or business, the safe harbor is unavailable for the entire business. For more information on the final safe harbor rule, visit Tax Facts Online. Read More

DOL Proposes New Electronic Disclosure Rules for Pension Plans

In response to the Trump administration’s executive order, the DOL has proposed a safe harbor rule that would allow pension plans to satisfy disclosure obligations electronically. As currently proposed, the rule only applies to pension plans. It would allow plan sponsors to email required documents to participants, beneficiaries and any other individuals entitled to receive disclosures–so long as the individual has provided an email address (which can be a work email address). Any documents required under Title I of ERISA could be furnished electronically, including notices of material modification or blackout notices, except for documents that must be furnished upon request. While employers are not yet entitled to rely upon this rule until it is finalized, it provides important insight into potential future developments surrounding pension disclosure obligations. For more information on the requirements that apply to pension plans, visit Tax Facts Online. Read More

District Court Rules Small Business Qualified Retirement Plan Not Exempt in Bankruptcy

While 401(k) funds are generally exempt from a bankruptcy debtor’s estate, a recent district court ruling highlights a situation where a small business owner may lose the exemption. In this case, the taxpayer maintained a pension plan pursuant to a prototype plan document offered by his financial institution that had been approved via an IRS opinion letter, as is commonly the case. The court, however, found that amendments to the prototype plan document rendered the opinion invalid. Further, it found that the plan inappropriately benefitted the taxpayer and his spouse, rather than providing benefits to employees, in violation of IRS nondiscrimination rules. Because of this, the plan was deemed to be disqualified despite the fact that the taxpayer relied upon advisors to manage the plan. Because the taxpayer was owner of the small business responsible for the plan, he was deemed to be materially responsible for the qualification failure, therefore causing the plan assets to lose the typically available bankruptcy exemption. The court noted that this probably wouldn’t have been the case if the taxpayer had been an employee participating in a non-qualified plan. For more information on the treatment of 401(k) assets in bankruptcy, visit Tax Facts Online. Read More

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TaxFacts Intelligence Weekly of Aug 1, 2019 – Actionable Analysis for Financial Advisors

Posted by William Byrnes on August 5, 2019


2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Tuition Waiver for International Tax Online Courses (more information here)

Texas A&M University School of Law will launch August 26, 2019 its International Tax online curriculum for graduate degree candidates. Admissions is open for the inaugural cohort of degree candidates to pilot the launch of the Fall semester introductory courses of international taxation and tax treaties, and provide weekly feedback on content, support, and general experience in exchange for waiving the tuition and providing the books free.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

IRS Expands List of Preventative Care Coverage Not Subject to HDHP Deductibles
Pursuant to the executive order directing the agencies to expand the use of HSAs and HDHPs for individuals suffering from certain chronic conditions, the IRS has released Notice 2019-45, which expands the definition of “preventative care” to include certain treatments and medications related to chronic illnesses. Generally, HDHPs may now provide these forms of care on a pre-deductible basis without jeopardizing the plan’s status as an HDHP and the participant’s ability to use HSA funds in connection with that HDHP. The agencies have indicated that they will review the new list, which includes items deemed to be “low cost”, every five to ten years. The new table, contained Notice 2019-45, includes items such as glucometers for patients suffering from diabetes and beta blockers for patients suffering from congestive heart failure. For more information on HDHPs, visit TaxFacts Online. Read More
 

IRS Releases Premium Tax Credit-Related Inflation Adjustments for 2020
The IRS has released the Affordable Care Act (ACA) premium tax credit-related inflation adjusted numbers for use in 2020. In 2020, the percentage used to determine whether an individual is eligible for employer-sponsored health insurance that is affordable is 9.78% (down from 9.86% in 2019). This means that individuals who contribute more than 9.78% of their household income toward health insurance in 2020, he or she may be eligible for premium tax credit assistance. For more information on determining when health coverage is deemed affordable for ACA purposes, visit Tax Facts Online. Read More

 

IRS Announces Compliance Campaign Directed at S Corps
The IRS has announced that one of the areas it will be focusing its compliance efforts upon in the coming year involves S corporations that were formerly C corporations. The primary issue of focus will be the built-in gains tax. In general, the built-in gains tax applies to C corporations that convert to S status at a time when they have net unrealized built-in gain, and then sell assets within five years after converting to an S corporation. The tax should be paid at the S corporation level, but the IRS has determined that the tax is often not paid. While this does not necessarily mean that audit resources will be directed toward these entities, it does mean that the IRS has determined that it is necessary to dedicate training and resources toward the goal of ensuring proper compliance with the built-in gains tax. For more information on situations where S corporations may be taxed at the entity level, visit Tax Facts Online. Read More

 

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TaxFacts Intelligence Weekly of July 25, 2019 – Actionable Analysis for Financial Advisors

Posted by William Byrnes on July 26, 2019


2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

William H. Byrnes, J.D., LL.M. and Robert Bloink, J.D., LL.M.

Jul 25, 2019

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Taxpayer Cannot Shield Self-Directed IRA Assets from Bankruptcy Creditors

The 11th Circuit recently confirmed that a taxpayer was not entitled to creditor protection in bankruptcy with respect to a self-directed IRA that he used for impermissible purposes. The issue in this case was not whether IRA funds were used for prohibited personal use, however, but whether the assets left within the IRA could be protected from creditors in bankruptcy. The court ruled that the creditors could access amounts left in the IRA, regardless of whether that IRA continued to be tax-exempt, because the taxpayer failed to properly maintain the IRA by withdrawing funds for prohibited reasons in the past. For more information on the tax treatment of IRA assets in bankruptcy, visit Tax Facts Online. Read More

Proposed Regulations Would Eliminate the MEP “One Bad Apple Rule”

The IRS and Treasury have released proposed regulations that would eliminate the so-called “one bad apple rule” for multiple employer plans (MEPs). Under the one bad apple rule, the entire MEP could be disqualified based upon the actions of only one employer that participated in the plan. To qualify, the plan must have established practices and procedures designed to ensure compliance by all MEP participants. The failure must be isolated to a single employer, and cannot be a widespread issue across the employers. The plan administrator must have a process in place that would provide notice to the employer responsible for the failure, and such notice should include a description of the failure, actions necessary to remedy the failure, notice that the relevant employer has only 90 days from the notice date to take remedial action, a description of the consequences for failure to take the remedial action and notice of the right to spin off the non-compliant employer’s portion of the plan and assets. After providing the initial notice and two subsequent notices, the MEP must notify all participants, stop accepting contributions from the noncompliant party and implement spin off procedures designed to terminate the noncompliant employer’s interests in the MEP. For more information on plan qualification requirements, visit Tax Facts Online. Read More

Considering an Opportunity Zone Investment? Here’s How to Tell the IRS

Now that the IRS has released a significant amount of guidance on the opportunity zone rules, qualified opportunity zone funds are likely to become more common, leading taxpayers to question how to actually defer taxation on their capital gains through the opportunity zone rules. Taxpayers who have made a sale where the proceeds qualify for capital gain treatment may invest all or a part of that gain in a qualified opportunity fund and defer recognizing the gain under the new opportunity zone rules. The taxpayer makes the election on his or her tax return by attaching a completed Form 8949 to the return. For multiple investments occurring on different dates, the taxpayer uses multiple rows of the form to report the deferral election. If the taxpayer has already filed the relevant tax return, he or she will need to file an amended return to make the election. For more information on the opportunity zone rules, visit Tax Facts Online. Read More

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TaxFacts Intelligence Weekly

Posted by William Byrnes on December 3, 2018


TAX DEVELOPMENTS

SEC Announces New Disclosure Requirements for Variable Annuities and Life Insurance 
The SEC recently proposed a rule change designed to improve disclosures with respect to variable annuities and variable life insurance contracts. The new disclosure obligations would help investors understand the features, fees and risks to these types of products in an effort to allow investors to make more informed investment decisions. Under the proposal, annuity and life insurance carriers would be entitled to provide information to investors in a summary prospectus form that would provide a more concise summary of the terms of the contract. For more information on variable annuities, visit Tax Facts Online and Read More.

Digging Into the Details of Hardship Distributions for Primary Residence Purchases
Qualified plans can to allow participants to take hardship distributions to help with the purchase of a primary residence. The distribution must be directly taken to purchase the residence–items such as renovations made prior to move-in do not qualify. Despite this, the distribution can cover more than just the purchase price of the residence itself. Closing costs would also qualify, as would the cost of a piece of land upon which the primary residence would be built. If a participant buys out a former spouse’s interest in a jointly-owned home pursuant to divorce, the distribution would also qualify. For more information on the hardship distribution rules, visit Tax Facts Online and Read More.
Avoiding Gift Tax Traps This Holiday Season
Most taxpayers believe that they are not required to file a gift tax tax return if they do not owe gift taxes–as many will not because of the current $11.18 million gift tax exemption will shield most donors from gift tax liability. Despite this, each gift made during a donor’s lifetime serves to reduce that $11.18 million amount, which applies both to lifetime gifts and transfers made at death. Taxpayers must file Form 709 to report taxable gifts in excess of the annual exclusion amount to avoid potential IRS penalties for failure to file a return. The form is required not because gift taxes are owed, but to provide the IRS with a mechanism for tracking any given taxpayer’s use of the exemption amount during life. For more information on the gift tax filing requirements, visit Tax Facts Online and Read More.

Posted in Retirement Planning, Taxation | Tagged: , | 1 Comment »

IRS provides tax inflation adjustments for tax year 2019

Posted by William Byrnes on November 23, 2018


The Internal Revenue Service was very late (only on November 15) in announcing the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020.

The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
  • The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:

o 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);

o 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);

o 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);

o 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);

o 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).

o The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).

  • For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
  • The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
  • For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
  • For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
  • For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
  • For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
  • For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
  • Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
  • The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
  • The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.

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Tax Facts was first published in 1951 in a slim, 137-page volume covering the income, estate and gift tax aspects of life insurance and annuity ownership, titled Tax Facts on Life Insurance. Since that first year, the breadth and depth of Tax Facts coverage has grown to include employee benefits, business continuation, individual and qualified retirement plans, as well as decades of hard-to-find rulings and clarifications of longstanding regulations.  In 1983, Tax Facts grew to two volumes, with the second covering investments of all types: stocks, bonds, mutual funds, real estate, and the tax requirements related to each. What began as a 234-page book grew rapidly as tax reform in the 1980s multiplied the rules covering the treatment of investments.

In 2010 Tax Facts expanded to its current 4 volume and online format.  In its 67-year history, Tax Facts has become the financial advisor industry’s standard for clear, up-to-date thorough tax information. Now in an all-inclusive online format, every answer, ruling and table is easier than ever to find.

Tax Facts is the place I go to find the answers to those tough life insurance questions that no one else has – and to check those they do. It’s THE SOURCE for authoritative income, estate, and gift tax information on life insurance and annuity contracts.”

Posted in Estate Tax, Retirement Planning, Taxation | Tagged: , , , | Leave a Comment »

TaxFacts Intelligence Weekly Nov 16th

Posted by William Byrnes on November 16, 2018


IRS Releases Guidance on Impact of Personal Exemption Suspension on Premium Tax Credit
The 2017 tax reform legislation suspended the personal exemption for tax years beginning after 2017 and before 2026. Relatedly, taxpayers are entitled to claim the Affordable Care Act premium tax credit with respect to an individual if the taxpayer has claimed an exemption with respect to that taxpayer (i.e., the personal or dependency exemption). A taxpayer is entitled to claim the premium tax credit with respect to another individual if the taxpayer would otherwise be entitled to claim a dependency exemption with respect to that individual, and includes the individual’s name and TIN on his or her Form 1040. For more information, visit Tax Facts Online and Read More.
OTHER IMPORTANT DEVELOPMENTS

Grandfathering Potential May Still Exist Under Section 162(m) Post-Regulations
The IRS regulations governing the new limitations on the Section 162(m) executive compensation deduction limits may have curtailed grandfathering opportunities that some had expected under the new tax law, but possibilities still remain. The test for determining whether grandfather treatment is permitted involves whether the company was legally obligated to pay the compensation under state law (meaning contract law) as of November 2, 2017. For more information on the new rules governing the deductibility of executive compensation, visit Tax Facts Online and Read More.

LITIGATION WATCH

Tax Court Rules Business-Provided Life Insurance Taxable to Insured Individual Under Split Dollar Rules
The Tax Court recently ruled that the “economic benefit” of business-sponsored life insurance provided to a key employee through a multiple-employer welfare benefit fund was taxable income to the employee. The Tax Court agreed with the IRS that this structure required current income inclusion under the split dollar life insurance principles, so that the economic benefit received by the employee was required to be included in his gross income for the year in question despite the fact that no actual cash benefits were received during that year. For more information on the rules governing split dollar life insurance, visit Tax Facts Online and Read More.

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TaxFacts Intelligence Weekly

Posted by William Byrnes on September 21, 2018


TAX REFORM DEVELOPMENTS

IRS Provides Guidance Updating Accounting Method Changes for Terminated S Corporations
The 2017 tax reform legislation added a new IRC section that now requires eligible terminated S corporations to take any Section 481(a) adjustment attributable to revocation of the S election into account ratably over a six-year period. Under newly released Revenue Procedure 2018-44, an eligible terminated S corporation is required to take a Section 481(a) adjustment ratably over six years beginning with the year of change if the corporation (1) is required to change from the cash method to accrual method and (2) makes the accounting method change for the C corporation’s first tax year. For more information on the rules governing S corporations that convert to C corporation status post-reform, visit Tax Facts Online and Read More.
OTHER IMPORTANT DEVELOPMENTS

IRS Guidance on Interaction between New Association Health Plan Rules and ACA Employer Mandate
The IRS recently released new guidance on the rules governing association health plans (AHPs), which permit expanded access to these types of plans, and the Affordable Care Act (ACA) employer mandate. The guidance provides that determination of whether an employer is an applicable large employer subject to the shared responsibility provisions is not impacted by whether the employer offers coverage through an AHP. Participation in an AHP does not turn an employer into an applicable large employer if the employer has less than 50 employees. For more information on the employer mandate, visit Tax Facts Online and Read More.

OCC Explains Employee Tax Consequences of Employer’s Belated Payment of FICA Tax on Fringe Benefits
The IRS Office of Chief Counsel (OCC) released a memo explaining the tax consequences of a situation where the employer failed to include $10,000 of fringe benefits. The employer paid the FICA taxes associated with the benefits in 2018, although the benefits were provided in 2016. The guidance provides that the payment in 2018 did not create additional compensation for the employee in 2016. If the employer collects the amount of the employee portion of the FICA tax from the employee in 2018, the employer’s payment is not additional compensation. However, if the employer does not seek repayment, the payment of the employee’s portion is additional compensation. For more information on FICA tax issues in the employment benefit context, visit Tax Facts Online and Read More.
LITIGATION WATCH

Employer Amendments to VEBA Did Not Result in Adverse Tax Consequences
The IRS recently ruled that an employer could amend its voluntary employees’ beneficiary association (VEBA) to provide health benefits for active employees in addition to retired employees without violating the tax benefit rule or incurring excise taxes. In this case, the VEBA provided health benefits for collectively bargained retired employees. When the VEBA became overfunded, the employer proposed transferring the excess assets into a subaccount for collectively bargained active employees. The IRS found that this proposed amendment would not violate the tax benefit rule because, the new purpose of providing health benefits to active employees under a collective bargaining agreement was not inconsistent with the employer’s earlier deduction. For more information on VEBAs, visit Tax Facts Online and Read More.
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Will Trump Keep His Promise that No One’s Retirement Will Be Taken Away?

Posted by William Byrnes on November 16, 2017


The 2017 Tax Reform discussion originally was, like the 1986 discussion, about whether the Internal Revenue Code should be used for incentives and subsidy in favor of a particular activity or particular group of taxpayers. Broaden the base, lower the rates, simplify the variations, exceptions, and exemptions. But the dueling Chamber proposals are now out and tax reform based on equity and on eliminating tax-incentives was dead on arrival. It the same old ‘every interest’ vying for a portion of the pie. That’s the democratic, political “Gulchi Gulch” process. What is my interest then? I work for a public research university. I have ‘a dog in this fight’ described below. Hope that the government relations staff of NTEU, of state universities, and of other government employee stakeholder groups raise their voices like the Seraphim to the Republican members of the Finance Committee that are willing to listen.

So what’s so alarmed me to divert my attention to the retirement provisions of the Senate Chair’s mark? Did not the President state that retirement would be left alone (see his tweet here)?  Appears the Senate ignored him as usual.

The Senate Finance Committee Chair slipped in (at page 178) an explosive measure for government employees that also impacts public academic institutions. The Senate Finance Committee Tax Reform Chair’s Mark under the current status (November 9, 2017) will limit public employees to one aggregate amount of $18,500 for retirement plans 403(B) and 457 as of January 1, 2018.

Finance Committee Chair Proposal: The proposal applies a single aggregate limit to contributions for an employee in a governmental section 457(b) plan and elective deferrals for the same employee under a section 401(k) plan or a 403(b) plan of the same employer. Thus, the limit for governmental section 457(b) plans is coordinated with the limit for section 401(k) and 403(b) plans in the same manner as the limits are coordinated under present law for elective deferrals to section 401(k) and section 403(b) plans.

Government, including public educational institution, employees needs to become immediately aware that this provision will critically reduce their ability to contribute to their employer retirement plan(s) by $18,500 (or $24,500 for employees 50 years and older) as of January 1, 2018.  Thus, while there is still time to make December 1st contribution changes to preserve the last year of the additional $18,000 (or $24,000 if at least 50 years of age), these employees need to arrange with their payroll officers to contribute before December 31st any difference between what is allowed in 2017 and what has actually been contributed. As of January 1, 2018, the ability to contribute is gone forever.

Hatch Amendment #2 An amendment to the catch up contribution rules for section 401(k), 403(b) and 457)(b) retirement savings plans. Description of Amendment: This amendment would require all catch up contributions to section 401(k), 403(b) and 457(b) retirement savings plans to be Roth only, and increase the $6,000 catch up contribution annual limit applicable to such plans to $9,000.

See what he’s done here to Americans trying to save for retirement? At age 50 plus, we will pay on average – say 30 percent – for each catchup retirement dollar. How many years does it take to catchup with this 30 percent loss out the door? Based on historical annual average market returns, it will require four years to break even on the 30 percent loss. Only in year five will the 50-year-old, based on historical returns, start to earn towards retirement relative to her situation today in 2017. Where does our 30 percent loss out the door go? To pay for …. an energy credit? I don’t know. The revenue raised is relatively minuscule. The damage to retirement savings – tremendous.

Lack of Impact Analysis on Retirement and Public Employees

Curiously, I have not found many informative articles about the impact to retirement from these above-mentioned changes. Why is it silence from the public university crowd that is usually quite loud although this provision will damage their ability to attract researchers, faculty, and staff from the higher compensation opportunities of private educational institutions and for-profit industry?  Are we embarrassed to appear to be lobbying to keep a tax break? Just caught by surprise?  At least the NAGDCA has sent out an alert (Government Defined Contribution Administrators) to its members.

Instead of the beneficial retirement system, government agencies and public institutions need to find more revenue to pay competitive salaries and employee benefits to replace the loss of the retirement benefits (doubtful) Senate Finance will take away. Lacking better salaries, government agencies and public institutions will experience disproportionate employee turnover of the best performing management coupled with a declining ability to attract highly accomplished professionals and researchers to replace the pool.

Is this Payback Against the IRS?

Perhaps this provision is a Republican payback to government agencies like the IRS because Republicans think that the current government management pool is biased against Republican groups or lacks service for taxpayers? But taking out the best performing managers from government service will exasperate the challenges, not remediate them. If this is a ‘payback’, then it is “cutting off one’s nose”.  Perhaps the provision is but a Machiavellian move in a contest for talent between a state university and its private counterpart (Utah v BYU comes to mind)?

Maybe the silence from the government and public institutions employees is ‘heads in the sand’, and perhaps ‘those in the know’ think this provision will not survive because JCT scored it as only worth $100 million a year at least until 2021 (so why waste the political capital). Apportioned amongst all government employees in the US (being federal and state), state public academic institutions I suspect are less than 10 percent of this score, thus about $10 million a year for offset (inconsequential basically).

Can Public Institutions Be Saved?

A carve-out from this provision for public educational institutions would address the harmful issue and can be negotiated in response to the also proposed loss of the current carve-out for deferrals allowed for section 403(b) plan for at least 15 years of service to an educational organization, hospital, home health service agency, health and welfare service agency, and church. Seems to me that Republicans would prefer to incentivize via retirement doctors, nurses, social workers, and clergy to stay long-term in their public positions instead of paying higher government salaries.

Interested to learn the impact on your clients of the 2018 tax changes, and what to do about it?  Read the online version of Tax Facts.

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Retirement: Pros, cons, commissions and costs of fixed-index annuities

Posted by William Byrnes on August 17, 2015


Fixed index annuities are the current flavor and will remain so while consumers perceive the market indexes potentially rising,” says William Byrnes, an associate dean at Texas A&M University School of Law in Fort Worth.

Sales of FIAs rose 14% to $38.7 billion in 2013 and another 24% to $48 billion in 2014, or about 21% of all annuity sales …

read the USA Today analysis of Fixed Index Annuities at USA Today and whether these are a good fit for a retirement plan.

Posted in Retirement Planning | Tagged: , | 3 Comments »

weekly financial planning strategies

Posted by William Byrnes on March 24, 2015


Deferred Income Annuities’ Flex Pay Appeals to Younger Investors

A flurry of regulatory activity has put deferred income annuities (DIAs) in the spotlight frequently in the past year, with many billing DIAs as the up-and-coming option for clients to ensure sufficient income even at an advanced age. Often overlooked,…

QLACs Change the Game in Social Security Timing

Qualified longevity annuity contracts (QLACs) have, in theory, existed for nearly three years, but it’s only in recent months that insurance carriers have begun to offer these products—finally making the QLAC a realistic planning option. While the purpose behind the…
5 Hot Retirement Planning Topics for 2015

Here are some of the top retirement planning trends that your clients need to be aware of in order to maximize their retirement account values in 2015 and beyond. 1: QLACs Become a Reality … 2) Split 401(k) Rollovers Maximize…

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10 most tax-friendly states for retirees

Posted by William Byrnes on March 23, 2015


NU logoEvery client’s goals are different when it comes to choosing where to retire, but from a tax perspective, there are some clear winners that can allow a client to maximize the value of accumulated retirement savings.

While the client’s lifestyle choices — a desire for an expensive home vs. spending on consumer products, for example — greatly impact the tax system that will provide the most substantial benefits, below is a list of ten of the top states for retirees, from a tax perspective. read the analysis of Prof. William Byrnes and Robert Bloink in National Underwriter Life Health Pro

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Tax Time Guide: Still Time to Contribute to an IRA for 2014

Posted by William Byrnes on March 18, 2015


IRS logo“Taxpayers still have time to contribute to an IRA for 2014 and, in many cases, qualify for a deduction or even a tax credit”, stated the IRS in this week’s newswire (50-IR-2015). (see 7 Tax Facts for Making IRA Contributions)

Available in one form or another since the mid-1970s, individual retirement arrangements (IRAs) are designed to enable employees and self-employed people to save for retirement. Contributions to traditional IRAs are often deductible, but distributions, usually after age 59½, are generally taxable. Though contributions to Roth IRAs are not deductible, qualified distributions, usually after age 59½, are tax-free. Those with traditional IRAs must begin receiving distributions by April 1 of the year following the year they turn 70½, but there is no similar requirement for Roth IRAs.

see 5 Tax Facts for Year End IRA

Most taxpayers with qualifying income are either eligible to set up a traditional or Roth IRA or add money to an existing account. To count for 2014, contributions must be made by April 15, 2015. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the saver’s credit when they fill out their 2014 returns.

see Can an individual roll over or convert a traditional IRA or other eligible retirement plan into a Roth IRA?

Eligible taxpayers can contribute up to $5,500 to an IRA. For someone who was at least age 50 at the end of 2014, the limit is increased to $6,500. There’s no age limit for those contributing to a Roth IRA, but anyone who was at least age 70½ at the end of 2014 is barred from making contributions to a traditional IRA for 2014 and subsequent years.

The deduction for contributions to a traditional IRA is generally phased out for taxpayers covered by a workplace retirement plan whose incomes are above certain levels. For someone covered by a workplace plan during any part of 2014, the deduction is phased out if the taxpayer’s modified adjusted gross income (MAGI) for that year is between $60,000 and $70,000 for singles and heads of household and between $0 and $10,000 for married persons filing separately. For married couples filing a joint return where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range for the deduction is $96,000 to $116,000. Where the IRA contributor is not covered by a workplace retirement plan but is married to someone who is covered, the MAGI phase-out range is $181,000 to $191,000.

see When Are IRA Funds Taxed?

The deduction for contributions to a traditional IRA is claimed on Form 1040 Line 32 or Form 1040A Line 17. Any nondeductible contributions to a traditional IRA must be reported on Form 8606.

Even though contributions to Roth IRAs are not deductible, the maximum permitted amount of these contributions is phased out for taxpayers whose incomes are above certain levels. The MAGI phase-out range is $181,000 to $191,000 for married couples filing a joint return, $114,000 to $129,000 for singles and heads of household and $0 to $10,000 for married persons filing separately. For detailed information on contributing to either Roth or traditional IRAs, including worksheets for determining contribution and deduction amounts, see Publication 590-A, available on IRS.gov.

see Recharacterizing Roth IRAs Smartly: Use Multiple Roths

Also known as the retirement savings contributions credit, the saver’s credit is often available to IRA contributors whose adjusted gross income falls below certain levels. For 2014, the income limit is $30,000 for singles and married persons filing separate returns, $45,000 for heads of household and $60,000 for married couples filing jointly.

Eligible taxpayers get the credit even if they qualify for other retirement-related tax benefits. Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. The amount of the credit is based on a number of factors, including the amount contributed to either a Roth or traditional IRA and other qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

see High-income clients able to fund Roth IRAs?

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts has been famous over 50 years.

Anyone interested can try Tax Facts Online risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

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Longevity Pegged Annuities – What’s Changed With The Final Regulations

Posted by William Byrnes on February 12, 2015


Nysscpa-site-logo

 

Longevity Pegged Annuities – What CPAs Need to Know About the New Rules (William Byrnes & Robert Bloink)

The Treasury Department made sparks fly when it recently issued final regulations governing qualified longevity annuity contracts (QLAC).

read the full story at CPA Journal of the New York Society of Certified Public Accountants http://viewer.zmags.com/publication/8df8c3b9#/8df8c3b9/66

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5 Tax Facts for Year End IRA

Posted by William Byrnes on December 11, 2014


Individual Retirement Accounts are an important way to save for retirement. A taxpayer who has an IRA or who may open one soon need to be aware of four key year-end Tax Facts.

1. What is the IRA Annual Contribution Limit for 2014?  A taxpayer can contribute up to a maximum of $5,500 ($6,500 if 50 or older) to a traditional or Roth IRA. If a taxpayer files a joint return with a spouse, each taxpayer may contribute to an IRA even if only one has taxable compensation.  In some cases, the taxpayer may need to reduce the income tax deduction allowed for the traditional IRA contributions.  This income tax deduction reduction applies if one of the spouses has a retirement plan already at work and their combined income is above a certain level.

2. What is the Last Day to Contribute to 2014 IRA Limit? A taxpayer can actually contribute in 2015 toward the 2014 IRA contribution maximum amount allowed, but the last day for such catch up contribution is April 15, 2015 (the date the tax return for 2014 is due).

3. What is the Penalty for Contributing More Than the Limit?  A taxpayer is subject to a six percent tax on the excess contribution above the IRA contribution limit for the year.  Worse though, the tax applies each year that the excess amount remains in the IRA account.  To avoid this penalty, a taxpayer must withdraw the excess amount from the IRA by April 15, 2014, or by the date of any 2014 filing extension.

4. When Must a Taxpayer Begin Taking the IRA Required Minimum Distributions (RMD)?  When a taxpayer reaches age 70½, then a required minimum distribution, or RMD, is required from a traditional IRA.  However, a Roth IRA does not have a RMD.  The RMD is required by Dec. 31, 2014.  But the deadline is April 1, 2015 if the taxpayer reached 70½ in 2014.

When a taxpayer has more than one traditional IRA, then the RMD calculation is required to be made separately for each IRA. But, the total RMD can be withdrawn from just one, or more of them.  The penalty for not taking the full annual RMD amount is a 50 percent excise tax on the RMD amount not withdrawn.

5. What is the Saver’s credit?  The formal name of the saver’s credit is the retirement savings contributions credit. A taxpayer may potentially qualify for this credit if contributing to an IRA or retirement plan. The saver’s credit can increase the tax refund or reduce the tax owed for 2014.

2015_tf_on_indiv_sm_business_cover-mTax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
• Healthcare & New Medicare Tax and Net Investment Income tax
• Business Deductions and Losses including Home Office
• Contractor vs. Employee — clarified!
• Business Life Insurance
• Small Business Entity Choices & Small Business Valuation
• Capital Gains & Investor Losses
• Accounting — including guidance on how standards change as the business grows

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Will the IRS Help Pay for Your Retirement ?

Posted by William Byrnes on November 17, 2014


IRS logoIf you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:

1. Save for retirement.  The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.

2. Save on taxes.  The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

3. Income limits.  Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:

• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.

• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.

• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.

4. When to contribute.  If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.

If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.

5. Special rules apply.  Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2014.

• Another person can’t claim you as a dependent on their tax return.

IRS Resources

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How Did Deferred Annuities Emerge As the Preferred 401(k) Investment?

Posted by William Byrnes on November 13, 2014


Irs_logo

 

The IRS has cleared the path for 401(k) sponsors who wish to expand clients’ use of longevity insurance within 401(k)s by allowing target date funds (TDFs) to include deferred annuities, even for those plan participants who do not actively manage their investment allocations.

read about The New IRS Guidance

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COLA Increases for Dollar Limitations on Benefits and Contributions

Posted by William Byrnes on September 22, 2014


IRS logoThe Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases.  The IRS announced on October 31, 2013 cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2014.

Please see the COLA Increases Table below for prior years’ dollar limitations and Internal Revenue Code references.


 

2014 2013

2012

IRAs

IRA Contribution Limit $5,500 $5,500 $5,000
IRA Catch-Up Contributions 1,000 1,000 1,000

IRA AGI Deduction Phase-out Starting at

Joint Return 96,000 95,000 92,000
Single or Head of Household 60,000 59,000 58,000

SEP

SEP Minimum Compensation 550 550 550
SEP Maximum Contribution 52,000 51,000 50,000
SEP Maximum Compensation 260,000 255,000 250,000

SIMPLE Plans

SIMPLE Maximum Contributions 12,000 12,000 11,500
Catch-up Contributions 2,500 2,500 2,500

401(k), 403(b), Profit-Sharing Plans, etc.

Annual Compensation 260,000 255,000 250,000
Elective Deferrals 17,500 17,500 17,000
Catch-up Contributions 5,500 5,500 5,500
Defined Contribution Limits 52,000 51,000 50,000
ESOP Limits 1,050,000
210,000
1,035,000205,000 1,015,000200,000

Other

HCE Threshold 115,000 115,000 115,000
Defined Benefit Limits 210,000 205,000 200,000
Key Employee 170,000 165,000 165,000
457 Elective Deferrals 17,500 17,500 17,000
Control Employee (board member or officer) 105,000 100,000 100,000
Control Employee (compensation-based) 210,000 205,000 205,000
Taxable Wage Base 117,000 113,700 110,100

 

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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Recharacterizing Roth IRAs Smartly: Use Multiple Roths

Posted by William Byrnes on September 11, 2014


International Financial Law Prof Blog –

The benefits of creating a stream of tax-free income during retirement is key to most successful retirement income strategies, and a Roth conversion that allows the client to “undo” the transaction if investments perform poorly is an attractive option for accomplishing this goal. However, despite the benefits that recharacterizing a Roth conversion can offer, this route can sometimes function as a double-edged sword by erasing the gains on successful investments within the account. Despite this, …

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Fixed Annuity Sales Rising in 2014, but Why ?

Posted by William Byrnes on September 10, 2014


International Financial Law Prof Blog – New studies show that, despite relatively stable conditions, fixed annuity sales have increased considerably in 2014 over 2013, as a perhaps unexpected number of clients flock toward these traditional guaranteed income products. 

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myRA: Making Retirement Planning Work Your Small Business

Posted by William Byrnes on August 6, 2014


SBA logo

SBA Webinar registration

This free webinar will focus on “myRA” (“My Retirement Account”), a new retirement savings account for individuals looking for a simple, safe, and affordable way to start saving.  Savers will be able to open an account for as little as $25 and contribute $5 or more every payday.  myRA balances will never go down, and there will be no fees. Initially, myRA will be made available through employers and the investment held in the account will be backed by the U.S. Treasury.

  • Date:Tue, Aug 12, 2014
  • Time:01:00 PM EDT
  • Duration:1 hour
  • Host(s):United States Treasury Department, Small Business Administration
  • Presenter: Cynthia Egan – Senior Advisor, Office of Domestic Finance, U.S. Department of the Treasury

For businesses, making myRA available to employees is straight-forward.  Treasury will handle account set-up and maintenance and will provide informational materials for business owners to share with their employees.  There is no employer-match or contribution.  In fact, all that interested employers have to do is to make Treasury-provided program materials available to their employees and set-up ongoing payroll direct deposits into myRA for interested employees.  myRA is intended for employees who do not have access to an employer-sponsored plan or who are not eligible for their employer’s plan.  myRA is not intended to replace current employer-sponsored retirement plan offerings.

Topics being discussed include:

  • Overview of myRA
  • Benefits of the program
  • Steps for employer adoption

A question and answer period will follow.

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Indexed Annuities and Guaranteed Lifetime Withdrawal Benefits (GLWBs)

Posted by William Byrnes on July 23, 2014


While finding the most suitable products to meet a client’s retirement income goals is fundamental to developing an appropriate retirement planning strategy, discovering the most desirable mixture of product features can prove equally critical.

In this vein, advisors should take note that indexed annuity sales have gained steam in recent months.  New studies suggest that while the base product itself may be attractive to many, in the vast majority of cases it is the optional features that are actually propelling sales.

Understanding how the guarantee features that can accompany indexed annuities have made these products competitive against more traditional bank-sponsored products has, therefore, become crucial to determining how these options can help an indexed annuity rise to the occasion.

Read the intelligence about guaranteed lifetime withdrawal benefits (GLWBs) and annuities of Professor William Byrnes and Robert Bloink at ThinkAdvisor

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 

 

 

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com

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Annuities and Long Term Care Does the Rider Fit?

Posted by William Byrnes on July 15, 2014


Protection against future long-term care (LTC) expenses is important for all clients.  For the right client, combining LTC insurance with an annuity product can make all the difference between comfort and anxiety late in life.

That the need for LTC coverage is relatively universal, however, does not mean that the analysis of a particular combination annuity-LTC product is any less nuanced.

Just as every client is different, not all LTC riders are created equally—and your advice can prove crucial in finding the most suitable product for the individual client.

Read the thoughts of Professor William Byrnes and Robert Bloink on long term care annuity riders at ThinkAdvisor.

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Interested in exploring a Master or Doctoral degree in the areas of financial services or international taxation? Let’s talk. profbyrnes@gmail.com Watch my youtube video by clicking on the logo to the left.

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Indexed Variable Annuities (IVAs) v. Structured Annuities

Posted by William Byrnes on July 14, 2014


Indexed variable annuities (IVAs) and structured annuities are two relatively new types of hybrid annuity products that are causing rampant confusion in today’s annuity marketplace. Used properly, these products can perform a significant role in a client’s portfolio, making it more important than ever to understand the nuances of these two annuity types.

The investment options offered by IVAs and structured annuities are extremely varied — in terms of opportunities for both market participation and downside protection — making the issue of client suitability particularly important. Today’s clients are looking for a customized product.

So it is time to begin asking: When it comes to IVAs and structured annuities, which product is the right fit?  Read the answer of Professor William Byrnes and Robert Bloink at LifeHealthPro

 

tax-facts-online_medium

Because of the constant changes to the tax law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.


If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

 

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The real Roth conversion question of 401(k) vs. IRA

Posted by William Byrnes on July 7, 2014


For some clients, moving traditional retirement funds into a Roth account may seem like a no-brainer, but once the decision to convert is made, choosing whether to use a Roth IRA or Roth 401(k) can have potentially significant repercussions.

While the typical goal of a Roth conversion — reducing tax liability during retirement — can be achieved with either account, that is where the similarities end.  In order to fully achieve the client’s goals, it is the dissimilarities between these two Roth varieties that can make all the difference.

Read Robert Bloink and WIlliam Byrnes’ analysis of the Roth conversion at LifeHealthPro

 

If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

 

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An unconventional retirement planning tool

Posted by William Byrnes on June 30, 2014


When it comes to retirement income planning for most clients, less is not more, and the contribution limits placed on traditional tax-preferred retirement vehicles have many of these clients searching for creative ways to ensure a comfortable retirement income level. Enter the health savings account (HSA), which, though traditionally intended to function as a savings account earmarked for medical expenses, can actually function as a powerful retirement income planning vehicle for clients looking to supplement their retirement savings.

For the strategy to work, however, it is important that your clients understand the rules of the game, and the potential penalties that can derail the substantial tax benefits that an HSA can offer.

The HSA income strategy …

Read William Byrnes & Robert Bloink’s analysis of an unconventional retirement planning tool on LifeHealthPro

 

If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

 

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Teaching an old dog a new trick: the modified endowment contract (MEC) and the modern portfolio

Posted by William Byrnes on June 6, 2014


The MEC 

A MEC is essentially a type of cash value life insurance policy that is subject to less favorable tax rules because it has been funded with premiums during the first seven years of the policy’s existence that exceed certain maximum amounts (depending on the policy’s benefit level and cost).  Despite this, the MEC’s worth today can remain substantial.

In some cases, dismissing the MEC too quickly can cause your clients to miss out on a valuable product.  For clients with sufficient means, the opportunity to rapidly fund a life insurance contract so as to become subject to the rules governing MECs may actually provide a powerful strategy in the well-rounded planner’s arsenal.

read this analysis in the article “The MEC and the Modern Portfolio

 

If you are interested in discussing the Master or Doctoral degree in the areas of financial planning, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

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An postretirement healthcare strategy overlooked

Posted by William Byrnes on June 4, 2014


Funding postretirement medical expenses in today’s marketplace is no small task, especially for the early retiree who has yet to qualify for Medicare coverage and may be reliant on an exchange-purchased health plan with a high deductible. VEBAs and other similarly complex structures have existed for years to help to provide additional funding, but options have evolved so that clients now have more practical and accessible solutions.

Read about “the rollover strategy

 

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

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Creative use of Social Security timing strategies

Posted by William Byrnes on May 30, 2014


Creative use of Social Security timing strategies can be key to securing comfort in retirement, and timing benefits so that your client can receive a lump sum payment during retirement can unlock many options for the older client. For those nearing retirement age, this seldom-discussed strategy may be needed to ensure longevity protection throughout a long retirement.  Read about this Social Security lump sum strategy

 


If you are interested in discussing the Master or Doctoral degree in the areas of financial planning, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

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GLWBs and LIBRs: Which annuity rider?

Posted by William Byrnes on May 29, 2014


Guaranteed Lifetime Withdrawal Benefit Riders (GLWBs) and Lifetime Income Benefit Riders (LIBRs) are two of the more easily confused rider options in a market where understanding the nuances can make or break a client’s financial plan. Even the most astute financial professional may have difficulty navigating the maze of features that can attach to an annuity.

Read the analysis of > GLWBs versus LIBRs < 

 

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

For an indepth analysis of deductions for donations to U.S. charities, download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

 

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High-income clients able to fund Roth IRAs?

Posted by William Byrnes on May 27, 2014


Roth IRAs usually do not make it into a higher-income client’s retirement planning playbook. The income limits set in place even prevent many upper-middle class clients from contributing to a Roth.

These limits do, in fact, block clients with earnings above the annual threshold level from contributing to a Roth directly, but there is an alternative route to Roths for high-income clients looking to minimize their tax burden in retirement.

Read >Roths for high earners: the strategy < !

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

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7 Tax Facts for Making IRA Contributions

Posted by William Byrnes on May 14, 2014


In Tax Tip 2014-50, the IRS discussed 7 important tax facts about planning for contributions to an IRA.

1. A taxpayer must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

2. A taxpayer 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 a taxpayer is married and files a joint return, generally only one spouse needs to have compensation.

3. A taxpayer can contribute to an IRA at any time during the year for that year and even may count contributions, up to a certain date, made the following year.  That certain date for 2013 contributions to count, even if made in 2014, is that the contributions made in 2014 had to be by the due date of the 2013 tax return (which was April 15).

Thus, contributions may count for the year 2014 that are made in 2014 and that are made in 2015 up until the date that the 2014 tax return must be filed (Wednesday, April 15, 2015.)

The date to include IRA contributions may not be pushed back with extensions.   Also, no double counting!   If a taxpayer contributes to an IRA between Jan. 1 and April 15, then the IRA plan sponsor must apply it to the correct year which is either the current one, or the previous one, depending upon what the taxpayer has planned.  In general, taxpayers will use this option to contribute toward last year’s contribution limit when at the end of the year, they discover that they have not contributed the full amount allowed by the IRA tax rules.  Said another way, the taxpayer has excess contribution limit remaining for the previous year, and this option allows the taxpayer to fill it.

4. In general, the most a taxpayer can contribute to an IRA for 2014 is the smaller of either your taxable compensation for the year or $5,500. If a taxpayer were age 50 or older at the end of 2014, the maximum you can contribute increases to $6,500.

5. A taxpayer normally will not pay income tax on funds in a traditional IRA until the taxpayer starts taking distributions from it. Qualified distributions from a Roth IRA are tax-free.

6. A taxpayer may be able to deduct some or all of the contributions to a traditional IRA.  A taxpayer should use the worksheets in the Form 1040A or Form 1040 instructions to figure the amount of the contribution that can be deducted for a traditional IRA.  Unlike a traditional IRA, a taxpayer cannot deduct contributions to a Roth IRA.

7. A taxpayer can contribute to an IRA and also may also qualify for the Saver’s Credit. The credit can reduce taxes up to $2,000 if filing a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit.

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

For an indepth analysis of deductions for donations to U.S. charities (and the government’s policy encouraging or discouraging these donations), download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

Posted in Retirement Planning | Tagged: | Leave a Comment »

More than 40% of big firm partners retiring over coming decade – and many will outlive retirement savings!

Posted by William Byrnes on May 5, 2014


On April 28, 2014 The American Lawyer published its annual (2014) Big Law report in which it found that 16% of partners in the US’ largest 200 law firms by revenue are 60 years old or older with at least 8% least 65.  This generally means that these partners will be retiring over the next five years.  Moreover, right behind this retiring group are 28% more of the partners that have reached at least 50 years of age.

While these thousands of retiring partners have in general been earning between $1 million and $3 million annually, most also have lifestyles that correspond to spending this level of income.  These retiring partners are now asking “Will my retirement portfolio maintain my spouse and my lifestyles if we live another 30 years?”  “Will we have enough to truly enjoy our retirement, or will we have to cut back our lifestyle to make due?”  Will plans for luxurious global travel and spas be thrown out the window?  Wealth managers and financial planners have turned attention to these retirees.

“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed before the financial crisis, forcing a drastic reduction in quality of life style for the ‘golden years’” shared William Byrnes, author of National Underwriter’s Tax Facts.

“The largest concern for most middle class Americans is that social security since Ronald Reagan’s presidency did not increase enough to beat actual inflation.  The average social security monthly payment in 2014 is only $1,294 for a single retiree, and $2,111 for a married couple.  And it is possible that Congress will further reduce inflation adjustments for the future.”

“Moreover, baby boomers are outliving their retirement plans by at least ten years, and thus selling off their remaining assets and relying on children”, continued Professor Byrnes. “It’s no wonder that reverse mortgages have become so popular.”

“It’s not just the middle class retirees trying to survive on $2,500 a month over at least the next 20 years as lifestyle becomes more expensive, upper middle class Americans and even the wealthy also have lifestyle challenges.  A couple who for the past twenty years is used to spending $200,000 a year after tax needs to have significant assets.”

“Let’s run an example using a National Underwriter Advanced Markets retirement calculator.  A 50 year old partner at a law firm that requires retirement by age 67 currently earns after tax $300,000.  The partner will begin saving $60,000 a year toward retirement, and already has $400,000 saved and earned in tax deferred retirement accounts.  The partner expects earnings to increase 1.5% on average per year.  The partner expects to live until 90 years old, and will cut the annual lifestyle by 30% to $210,00 a year upon retirement.  The partner expects a healthy annual rate of return on the investments until reaching 90 of 5%, and average annual inflation of only 2%.”

“The question is: Will the partner’s retirement dollars last  until age 90? Unfortunately, the partner has only 13 years of retirement based on this scenario, and that only if including $42,937 of average annual social security.  At age 80, the $2,439,817 of retirement savings simply runs out. So given these variables, the partner must either save significantly more for retirement, have assets that can be sold down during retirement (such as the family home), or live on only $150,000 a year.  While $150,000 a year sounds like a lot to middle class retirees, for law firm partners living in New York, Miami, DC, LA, San Fran who are used to an upper class lifestyle, living on half the income with double the free time is a shock. And remember, this includes social security paying out over $40,000 of that $150,000 a year.”

“Stretching the retirement savings available for these additional ten years of life expectancy in the example above requires correctly calibrating a retirement plan over the next 20 years which includes managing the complex retirement savings and retirement plans tax rules.”

Robert Bloink added, “Baby boomers retirement taxation questions include: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected Dr. George Mentz. “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  “Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.“

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

 

 

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

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5 Tax Facts for Early Retirement Plan Withdrawals

Posted by William Byrnes on April 28, 2014


In Tax Tip 2014-35, the IRS addressed the issue of potential tax penalties for withdrawing money before retirement age from a retirement account.

5 tax tips about early withdrawals from retirement plans:

1. An early withdrawal normally means taking money from a retirement plan before age 59½.

2. If a taxpayer makes a withdrawal from a plan, that withdrawal amount must be reported to the IRS on the annual tax return.  Income tax may be due as well as an additional 10 percent tax on the amount of the early withdrawal.  The taxpayer may need to file Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts”, with the annual federal tax return.

3. The additional 10 percent tax does not apply to nontaxable withdrawals.  Nontaxable withdrawals include withdrawals of the cost to participate in the retirement plan.  The cost includes the taxpayer’s after-tax contributions before the contributions are contributed to the plan.

4. A “rollover” is a type of nontaxable withdrawal. Generally, a rollover is a distribution to the taxpayer of cash or other assets from one retirement plan that is then immediately contributed to another retirement plan.  The taxpayer has 60 days to complete the rollover to make it tax-free.

5. There are many exceptions to the additional 10 percent tax. Some of the exceptions for retirement plans are different from the rules for IRAs.

Exceptions to Tax on Early Distributions

Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies.

The distribution will NOT be subject to the 10% additional early distribution tax in the following circumstances: Exception to 10% Additional Tax
Qualified Plans
(401(k), etc.)
IRA, SEP, SIMPLE IRA* and SARSEP Plans Internal Revenue Code Section(s)
Age
after participant/IRA owner reaches age 59½ yes yes 72(t)(2)(A)(i)
Automatic Enrollment
permissive withdrawals from a plan with auto enrollment features yes yes for SIMPLE IRAs and SARSEPs 414(w)(1)(B)
Corrective Distributions
corrective distributions (and associated earnings) of excess contributions, excess aggregate contributions and excess deferrals, made timely yes n/a 401(k)(8)(D),
401(m)(7)(A),
402(g)(2)(C)
Death
after death of the participant/IRA owner yes yes 72(t)(2)(A)(ii)
Disability
total and permanent disability of the participant/IRA owner yes yes 72(t)(2)(A)(iii)
Domestic Relations
to an alternate payee under a Qualified Domestic Relations Order yes n/a 72(t)(2)(C)
Education
qualified higher education expenses no yes 72(t)(2)(E)
Equal Payments
series of substantially equal payments yes yes 72(t)(2)(A)(iv)
ESOP
dividend pass through from an ESOP yes n/a 72(t)(2)(A)(vi)
Homebuyers
qualified first-time homebuyers, up to $10,000 no yes 72(t)(2)(F)
Levy
because of an IRS levy of the plan yes yes 72(t)(2)(A)(vii)
Medical
amount of unreimbursed medical expenses (>7.5% AGI; after 2012, 10% if under age 65) yes yes 72(t)(2)(B)
health insurance premiums paid while unemployed no yes 72(t)(2)(D)
Military
certain distributions to qualified military reservists called to active duty yes yes 72(t)(2)(G)
Returned IRA Contributions
if withdrawn by extended due date of return n/a yes 408(d)(4)
earnings on these returned contributions n/a no 408(d)(4)
Rollovers
in-plan Roth rollovers or eligible distributions contributed to another retirement plan or IRA within 60 days yes yes 402(c), 402A(d)(3), 403(a)(4), 403(b)(8), 408(d)(3), 408A(d)(3)
Separation from Service
the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees in a governmental defined benefit plan) yes no 72(t)(2)(A)(v),
72(t)(10)

NOTE: Governmental 457(b) distributions are not subject to the 10% additional tax except for distributions attributable to rollovers from another type of plan or IRA.

*25% instead of 10% if made within the first 2 years of participation

tax-facts-online_medium

Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.  Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 

Posted in Retirement Planning | Tagged: , , , | 1 Comment »

Court Approves New Planning Techniques for Investment Income Tax Trap for Trusts

Posted by William Byrnes on April 22, 2014


The Tax Court recently handed down a decision that could prove to be just the break that trusts participating in business activities need to escape liability for the new 3.8 percent tax on investment-type income (the NIIT) enacted with the ACA / ObamaCare.

Many trusts with business-related income are finally feeling the sting of the tax, which applied to all trust investment income for trusts with income in excess of a low $11,950 in 2013 ($12,150 for 2014).* The decision paves the way for new planning techniques in 2014 and beyond …

Read about the new planning techniques for the new investment tax: https://www.lifehealthpro.com/2014/04/21/court-untangles-investment-income-tax-trap-for-tru

Also see previous planning analysis at https://profwilliambyrnes.com/2014/01/02/irs-gives-high-income-taxpayers-a-break-on-new-3-8-tax/

See also: 10 things to know about how investments are taxed

* Estates and trusts are subject to the Net Investment Income Tax if they have undistributed Net Investment Income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year under section 1(e) (for tax year 2013, this threshold amount is $11,950). For 2014, the threshold amount is $12,150.

<— Subscribe to this blog on the left side menu for unique weekly tax planning articles and tax facts tips

 

 

 

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Why Are Many Baby Boomer Retirees Worried?

Posted by William Byrnes on April 21, 2014


“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed twenty or thirty years ago, forcing a drastic reduction in quality of life style for the ‘golden years’” revealed William Byrnes, author of National Underwriter’s Tax Facts.

“By example, social security increases since Ronald Reagan’s presidency, when many Baby Boomers crafted their family retirement plans, did not keep up with the actual inflation.  Also, baby boomers are outliving their retirement plans by ten or more years”, continued William Byrnes.  “Stretching the retirement savings available for an additional twenty years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS.”

Robert Bloink added, “Baby boomers retirement taxation questions include: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected Dr. George Mentz.  “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  “Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.“

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

Posted in Estate Tax, Retirement Planning, Wealth Management | Tagged: , , , | Leave a Comment »

9 retirement savings tax tips

Posted by William Byrnes on April 17, 2014


You might be able to muddle through retirement without knowing each and every line of Uncle Sam’s tax code. But you’ll likely give the federal government more than its fair share of your nest egg if you don’t know what William Byrnes, author of National Underwriter’s Tax Facts, calls the big retirement plan tax facts.

Read the USA Today analysis, written by renown financial journalist Robert Powell:  “Stretching the retirement savings available for an additional 20 years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS,” says Byrnes, who is also associate dean at the Thomas Jefferson School of Law in San Diego, Calif.

The full analysis is available on USA Today at 9 retirement savings tax tips!

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11 more annuity tax facts you need to know

Posted by William Byrnes on April 14, 2014


An annuity is a complicated beast — and during tax season, your clients’ questions can pile up faster than hospitality complaints from the crowds at Sochi. How are payments under a variable immediate annuity taxed? When is the exchange of one annuity contract for another a nontaxable exchange? Read on to find answers to these and other queries.

1. What general rules govern the income taxation of payments received under annuity contracts?

read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

Posted in Estate Tax, Retirement Planning | Tagged: , , , | Leave a Comment »

12 more estate planning tax facts you need to know

Posted by William Byrnes on April 8, 2014


Estate planning is a complicated business. Before you sit down with clients, find out what Uncle Sam will demand if a life insurance policy or an annuity is part of their estate, or part of a recent inheritance.

1. When are death proceeds of life insurance includable in an insured’s gross estate?

They are includable in the following four situations: … Read all 12 Tax Fact estate planning tips at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

Posted in Estate Tax, Retirement Planning | Tagged: , , | Leave a Comment »

10 estate planning tax facts you need to know

Posted by William Byrnes on April 7, 2014


The fiscal cliff deal cleared up every estate planning tax question ever, right? Or not. Because for as much fanfare as the new estate tax received, there are still a lot of sticky tax-related questions out there.

Like what, exactly, constitutes an estate?

Do life insurance proceeds count?

What about employer-provided income benefits?

How are annuities treated?

Here are 10 big estate planning tax questions, answered.  Read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

 

Posted in Estate Tax, Retirement Planning | Tagged: , | Leave a Comment »

Transition into retirement seamlessly with combo DIA-variable annuity

Posted by William Byrnes on April 2, 2014


While deferred income annuities have gained a prominent position in the retirement income planning game, the newest entrant into the annuity marketplace is poised to change the way these products operate for good. This is because the new deferred income annuity comes wrapped up within a variable annuity product, allowing clients to access the best of both worlds though a single annuity contract.

By structuring the deferred income annuity as a rider, rather than as a stand-alone contract, insurance carriers can now provide clients with the ability to participate in market gains while ensuring sufficient income even late into retirement, without the need to purchase, manage, or exchange multiple annuity contracts.

Read the analysis of William Byrnes and Robert Bloink at > LifeHealthPro <

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

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IRS Grants Reprieve for Late Estate Tax Portability Elections

Posted by William Byrnes on March 31, 2014


Today’s generous estate tax exemption has created an unexpected problem among clients: failure to take advantage of the portability of a first-to-die spouse’s unused estate tax exemption. Unknown to many, portability is available only if you ask for it, and failure to elect portability can leave a surviving spouse’s estate facing an unexpectedly heavy tax burden, even if no estate tax was due upon the first spouse’s death.

Luckily, the IRS has provided a limited reprieve for certain clients whose inadvertent failure to make the election could leave them on the hook for an unnecessary estate tax bill.  The relief provided by the IRS, however, is limited in both time and scope, so the time to learn the rules of portability is now.

Read the analysis of William Byrnes and Robert Bloink at > ThinkAdvisor <

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

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Tomorrow’s Deadline (April 1) for Many Retirees To Take Required Retirement Plan Distributions

Posted by William Byrnes on March 31, 2014


The Internal Revenue Service in Tax Tip 2014-38 reminded taxpayers who turned 70½ during 2013 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Tuesday, April 1, 2014.

The April 1 deadline applies to owners of traditional IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457 plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2013 and receives the first required payment on April 1, 2014 must still receive the second RMD by Dec. 31, 2014.

Affected taxpayers who turned 70½ during 2013 must figure the RMD for the first year using their life expectancy on Dec. 31, 2013 and their account balance on Dec. 31, 2012. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the Appendices to Publication 590.

Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who turned 71 in 2013, for example, the first required distribution would be based on a life expectancy of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulations in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

The IRS encourages taxpayers to begin planning now for any distributions required during 2014. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2014 RMD, this amount would be on the 2013 Form 5498 that is normally issued in January 2014.

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Warning on IRA Rollovers: Regulators to Scrutinize Suitability

Posted by William Byrnes on March 22, 2014


Threats of heightened regulatory scrutiny have loomed large in the first weeks of 2014, and perhaps no area has received greater attention than the IRA rollover transaction.

Both the SEC and FINRA have issued warnings to advisors who provide guidance to clients looking to roll traditional workplace 401(k) accounts into private IRAs, and this focus on the importance of proper guidance should be keeping all advisors on their toes. For many advisors, this means a new course in IRA rollover compliance is called for, as even the most experienced professionals may find themselves in the dark over the new requirements being ushered in by the industry’s most prominent regulators.

Read the analysis of William Byrnes and Robert Bloink at > ThinkAdvisor <

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Retirement Planning, Uncategorized | Tagged: , | Leave a Comment »

The IRS Will Pay You to Save Retirement Money !

Posted by William Byrnes on March 18, 2014


2013_tf_insurance_emp_benefits_combo_covers-m_2The IRS reported in Tax Tip 2014-28 that it will pay some taxpayers to save for retirement!

If a taxpayer contributes to a retirement plan, like a 401(k) or an IRA, then the taxpayer may be eligible for the “Saver’s Credit”. The Saver’s Credit can help save for retirement and reduce this year’s tax owed.  5 facts about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on a taxpayer’s filing status and the amount of yearly income.  2013 tax return eligibility for the credit depends on:

  • Married filing separately or a single taxpayer with income up to $29,500
  • Head of household with income up to $44,250
  • Married filing jointly with income up to $59,000

3. Other special rules that apply to the credit include:

  • Must be at least 18 years of age.
  • Can’t be a full-time student in 2013.
  • Can’t be claimed as a dependent on another person’s tax return.

4. The taxpayer must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, a taxpayer can contribute to an IRA by the due date of a tax return (April 15, 2014) and still have that contribution count for 2013.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software includes this form for e-file.

The Saver’s Credit is in addition to other tax savings for setting aside money for retirement.  For example, a taxpayer may be able to deduct contributions to a traditional IRA.

Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

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Client’s Seeking Market Value Adjusted Annuities

Posted by William Byrnes on March 16, 2014


As clients have begun to feel the shifting winds with respect to the general economy, the annuity market is now undergoing its own type of evolution. While products that tie fluctuations in an annuity’s cash surrender value to prevailing market interest rates may have seemed unacceptably risky to most clients just a few months ago, changes in today’s interest rate environment now have clients flocking to find these features.

Annuities with market value adjustment (MVA) features may be the next hot product for clients looking to beat the return on other conservative investment products, so make sure you are ready for this emerging product trend.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Insurance, Pensions, Retirement Planning | Tagged: , , , , | Leave a Comment »

Client Opportunity – Secondary Market Annuities

Posted by William Byrnes on February 26, 2014


Staying ahead of client demands in the annuity product game is no simple feat for even the most informed of financial advisors, and the latest trend may prove even more crucial to successful advising—it involves not a new product or rider, but an entire market for annuities.

Newly developed uniform transfer standards and increased availability have caused so-called “secondary market annuities” to surge in popularity amongst clients in their quest to find financial products with above-average interest rates to supplement retirement income. What once was a niche market is gaining traction with the ordinary investor, and it is time for all advisors to get up to speed.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Insurance, Retirement Planning | Tagged: , , , | Leave a Comment »

How a Counterintuitive Social Security Strategy Can Fund an Early Retirement

Posted by William Byrnes on February 17, 2014


Astute financial producers recognize that some of the most successful planning strategies are those customized to meet the individual client’s needs, and, in some cases, this means defying conventional wisdom and focusing on the numbers at hand.  Effective Social Security planning is no different.

tax-facts-online_medium

While it may seem obvious to some advisors that clients should be counseled to delay collecting Social Security in order to maximize benefit levels, in reality this may not be the most effective strategy for many clients.  By going against the grain and claiming benefits early, this counterintuitive Social Security strategy can actually help clients make the most of their traditional retirement savings accounts.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

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Can Your Business Help its Employees Save in 2014 Via an Automatic Payroll Deduction IRA?

Posted by William Byrnes on February 3, 2014


This artticle discusses one avenue for retirement planning solutions for small businesses. Financial Planners who have small business clients may consider a discussion on the automatic payroll deduction IRAs as one simple way to help employees save for retirement.

A payroll deduction individual retirement account (IRA) is one simple way for businesses to give employees an opportunity to save for retirement. The program is easy to implement; the employer sets up the payroll deduction IRA program with a bank, insurance company or other financial institution, and then the employees choose whether and how much they want deducted from their paychecks and deposited into the IRA. Depending on the IRA service provider, some employees may also have a choice of investments depending on the IRA provider. Wealth managers can add value to employees and employers by, not only establishing a plan, but by also working with employees to help them manage their IRAs.

Under a payroll deduction IRA, the employee makes all of the contributions, thus there are no employer contributions. By making regular payroll deductions, employees are able to contribute smaller amounts each pay period to their IRAs, rather than having to come up with a larger amount all at once.

One advantage of these accounts is that there is little administrative cost and no annual filings with the government. Moreover, businesses of any size can participate as there is no requirement that an employer have a certain number of employees to set up a payroll deduction IRA.

Another element that makes the program attractive to some small businesses is that the program will not be considered an employer retirement plan subject to Federal requirements for reporting and fiduciary responsibilities as long as the employer keeps its involvement to a minimum.

Here’s how the IRAs generally work: The employer sets up the payroll deduction IRA program with a financial institution, such as a bank, mutual fund or insurance company. The employee establishes either a traditional or a Roth IRA (based on the employee’s eligibility and personal choice) with the financial institution and authorizes the payroll deductions. The employer withholds the payroll deduction amounts that the employee has authorized and promptly transmits the funds to the financial institution. After doing so, the employee and the financial institution are responsible for the amounts contributed.

Generally however, the employer needs to remain neutral with respect to the IRA provider. It cannot negotiate with an IRA provider to obtain special terms for its employees, exercise any influence over the investments made or permitted by the IRA provider, or receive any compensation in connection with the IRA program except reimbursement for the actual cost of forwarding the payroll deductions.

Commonly, any employee who performs services for the business (or “employer”) can be eligible to participate. The decision to participate is left exclusively up to the employee. The employees should understand that they have the same opportunity to contribute to an IRA outside the payroll deduction program and that the employer is not providing any additional benefit to employees who participate.

Employees’ tax-deferred contributions are generally limited to a maximum annual calendar year contribution, for 2014 that maximum is $5,500.00. Additional “catch-up” contributions of currently $1,000.00 a year are permitted for employees age 50 or over, thus a total of $6,500.00 a year for 2014.

Example of time value of money

Saving $500.00 per month, for 20 years, at 6% annual return over that time will provide you $232,176.00 for retirement.  See the US government’s Tools and Calculators for Investors

The new Presidential myRA to be established by Treasury in 2014

The new myRA, to be established by Treasury under request of President Obama, is covered previously in this blog at > myRA <  Several blog subscribers have emailed me with policy and operational questions about the “myRA“.   A vein of questions that I find particularly interesting is whether tax policy rests with the executive instead of Congress?  The myRA has a tax benefit (tax exemption during the earnings period) and a cost (no fees to be passed onto the employee, but as the adage goes: “there is no free lunch”).  Tax Policy (tax imposition and tax benefit) should be established by Congress as part of the democratic process of establishing a fiscal budget.   Yet, this norm is not absolute because Congress handed over of both establishing and enforcing regulation to the Executive (Treasury in this case).  Establishing and enforcing the regulations also impacts policy.  If you care to comment directly in the blog, do so below or feel free to continue sending me your comments directly. 

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Retirement Planning, Wealth Management | Tagged: , , , , , | Leave a Comment »

 
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