Cash or Lump Sum Payment – What is Best for You

Picture this: You’re leaving your current employer to start a new job or pursue other interests, and you’re about to receive a payout of the money in your retirement plan. What will you do with it? Keep the money invested and working full-time on your behalf in a tax-deferred retirement savings account? Or take the cash?

An Expensive Decision

While there may be circumstances that make taking the cash a necessity, it is generally not a smart move. First and foremost, you shortchange your financial future by cashing out and spending the money. Second, you’ll have to pay tax on the distribution, which means you may end up with less money than you had planned.*

Here’s how it works. Your distribution will be taxable to you at your ordinary income-tax rate. In fact, your employer is required to withhold 20% of your distribution as a “down payment” on your federal income-tax bill for the year. There could also be a 10% early withdrawal penalty on the distribution. (Some exceptions apply.)

If you don’t want to cash out the savings in your retirement plan when you leave, you have other options.

Let It Be

Instead of taking a distribution, you may be able to leave your money in your plan until you retire. Choosing this option lets you avoid a current tax bill and a possible penalty and it keeps your money invested tax deferred. Your plan administrator can tell you whether this option is available to you.

Roll It Over

Moving your money to an individual retirement account (IRA) or another employer’s plan that accepts rollovers is another option. In either case, it’s usually best to ask the administrator of your current plan to transfer your balance directly to the administrator of your new plan or the rollover IRA. You’ll avoid the automatic 20% withholding tax and any penalty that way. And your retirement savings can continue to grow uninterrupted.

Be smart. Keep your money working full-time for your future. To learn more about tax rules and regulations, give us a call today. Our knowledgeable and trained staff is here to help.

 

* Some plans allow participants to make after-tax Roth contributions. Distributions of Roth contributions and related earnings will not be subject to federal income tax when certain tax law requirements are met.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Using Stocks that Have Lost Their Value to Offset Stock Gains

With year-end just around the corner, you may be thinking of ways to reduce your taxes. If you own stocks (or mutual funds) that have declined in value, selling shares could produce a capital loss that you can use to offset gains on stock sales earlier this year.

However, suppose you still believe a particular stock has potential for future growth. Couldn’t you sell the stock and then immediately repurchase shares in the same company while the price is still low? That way, you could claim the capital loss on your tax return and still own the stock.

Unfortunately, the IRS limits the use of this strategy. The tax law’s “wash-sale rule” prevents you from claiming a capital loss on a securities sale if you buy “substantially identical” securities within 30 days before or after the sale. To claim the loss, you’d have to wait more than 30 days after your sale to repurchase stock in the company.

To learn more about stock strategies and how they affects your taxes, give us a call today. Our staff of professionals are always happy to help.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

How to Withdraw from Your IRA Without a Penalty

You didn’t think you’d have a problem keeping your savings in your traditional IRA until you reached age 59½. Unfortunately, though, you need to take money out of your account now. You’ll have to pay income taxes on your early withdrawal, but what about the additional 10% penalty tax? Can it be avoided?

 

The federal tax law does let taxpayers off the 10% penalty hook in certain situations.

  • Higher education. You may withdraw money from your IRA without penalty for the payment of tuition and other eligible higher education expenses. The student can be you, your spouse, your child, or your grandchild.
  • Withdrawals for the payment of medical expenses in excess of 10% of your adjusted gross income* may be penalty free (other restrictions apply), as may withdrawals for the payment of medical insurance premiums after you’ve received unemployment compensation for at least 12 weeks.
  • Withdrawals on account of your disability (inability to engage in anysubstantial gainful activity) are penalty free.
  • “First-time” home buyer. You may withdraw up to $10,000 (lifetime cap) for the acquisition of a first home. The buyer can be you, your spouse, your child, or your grandchild, and the term “first” is interpreted loosely — as long as two years have elapsed since the buyer (and spouse) last owned a principal residence, the new home is considered a first home.
  • If you are a reservist ordered or called to active duty after September 11, 2001, withdrawals during the period beginning on the date of the order or call to active duty and ending at the close of your active duty period may be penalty free.
  • IRS levy. The penalty doesn’t apply to withdrawals on account of an IRS tax levy on your IRA.
  • Periodic payments. Taking a series of substantially equal periodic (at least annual) payments based on life expectancy will avoid the penalty.

 

Give us a call today, so we can help you determine the right course of action for you.

 

* 7.5% of adjusted gross income if age 65 or over.

What to Know Before You Donate Appreciated Assets

You can potentially maximize your donations to charity and your charitable income-tax deduction by donating property that has increased in value since you acquired it. Donated assets could include securities, real estate, or other types of property, such as works of art, antiques, or collectibles.

Why Not Sell First?

You could sell the appreciated asset and donate the net cash proceeds to charity. The organization would still receive a donation, and you would still be entitled to a tax deduction. But if you sell the asset first, you’ll have to pay taxes on the capital gain, so the amount available to contribute to the charity will be reduced.

A Win-win Idea

If you donate the appreciated asset without selling it first, the charity receives the full value of the property, and you may be entitled to deduct the full value of your donation on your federal income-tax return. To qualify for the full-value deduction, you must have held the asset longer than one year. (Other tax law limitations apply.)

Call us today for more tips on how to ensure you’re following business best practices, and let us help you keep your company in the black.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Ten Things You May Not Know About an LLC

You probably know of several businesses whose formal names end with the acronym LLC. And you probably also know that LLC stands for limited liability company. Here are ten things you may not know.

  1. An LLC generally protects its owners from personal liability for business obligations in much the same way a corporation does, but an LLC is not a corporate entity.*
  2. Like a corporation, an LLC can do business in multiple states, although an LLC must be organized in a specific state.
  3. The owners of an LLC are called “members.” There is no limit on the number of members an LLC can have, and members don’t necessarily have to be individuals. Members’ management roles are typically spelled out in an operating agreement.
  4. Upon formation of an LLC, the members contribute cash, property, or services to the LLC in exchange for LLC shares or units.
  5. An LLC may borrow money in its own name and is responsible for repayment of the debt.
  6. An LLC is usually treated as a partnership for federal income-tax purposes. (The remaining four points assume partnership treatment.)
  7. Like partners, LLC members are not considered employees of the company. However, an LLC can have non-member employees.
  8. LLC members are taxed directly on company income. The LLC itself doesn’t pay federal income taxes.
  9. If an LLC has a loss, its members generally can deduct their share of the loss on their own tax returns.
  10. For tax purposes, an LLC’s income and losses are divided among its members according to the terms of their agreement. Tax allocations must correspond to economic allocations of profit and loss.

An LLC is but one structure you might consider using for a business venture. We can help you determine which type of arrangement will best meet your objectives.

Whether you need individual or business tax advice, give us a call. We’ve got the answers you’re looking for, so don’t wait. Call us today.

Related: Is Construction Machinery Dangerous?

* Each state has its own laws governing LLCs. Consult with an attorney before establishing an LLC.

 

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

What You Need to Know about IRAs and Taxes

Tax deferral is a key benefit of investing in a traditional individual retirement account (IRA). But the tax law doesn’t allow indefinite tax deferral, which you can read about on this website. Starting at age 70½, IRA owners must withdraw a minimum amount — called a required minimum distribution, or RMD — every year. All funds withdrawn from a traditional IRA are taxed as ordinary income except for nondeductible contributions, which aren’t taxed again.

A beneficiary who inherits a traditional IRA doesn’t receive a pass on income taxes. If you inherit an IRA, be cautious about simply liquidating the account, since the tax bite could be quite large. Instead, talk with us about your distribution options.

As a Surviving Spouse . . .

You can leave the account as is and designate yourself as the account owner, assuming you are the sole designated beneficiary of your spouse’s IRA. Or you can roll the funds over into your own traditional IRA. Either way, you won’t have to take any money out until after you reach age 70½. Then, you’ll have to start taking RMDs. If you want to, you can allow the rest of your IRA to continue growing tax deferred.

A surviving spouse can also choose to be treated as the IRA beneficiary. This might be the better choice if you’ll need to take money from the IRA before you turn 59½, since withdrawals by IRA beneficiaries escape the 10% tax penalty on early withdrawals. What about RMDs? If you go the beneficiary route, you generally won’t have to start taking them until the year your spouse would have reached 70½.

As a Nonspouse Designated Beneficiary . . .

You can also stretch out withdrawals — and the related income taxes — by setting up an inherited IRA. The deadline for taking your first RMD is December 31 of the year after the year the account owner died. You may make additional withdrawals from the IRA at any time.

Somewhat different rules may apply if you receive an IRA that has passed through an estate instead of directly to you as the account’s designated beneficiary. To get the most from your IRA inheritance, you’ll want to carefully evaluate your options.

Give us a call today, so we can help you determine the right course of action for you.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Four Life Events that Affect Your Taxes

Even after you’ve filed your income-tax return, you’ll want to keep thinking about your tax situation. For example, if you experience any of the “life events” listed below in 2015, it may be a good time for some tax planning.

A job change. If you are eligible for a distribution from your former employer’s retirement savings plan, consider rolling the money into another tax-favored plan or an individual retirement account (IRA) to avoid the receipt of currently taxable income.

A home sale. You may exclude profit — within limits — on the sale of your principal residence from your taxable income if you meet the tax law’s requirements.

A marriage or divorce. File a new W-4 withholding allowance certificate with your employer or, if you pay quarterly estimated taxes, review the amount you are paying.

A new child arrives. As a parent, you may be eligible for various tax breaks. Ask us for details.

To learn more about how life events affect your taxes, give us a call today. Our staff of professionals are always happy to help.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Understanding Background Check Laws

As a business owner, it is normal to want to know as much as you can about a potential employee. That’s where background checks come into play, but before you dive in, you need to have a firm understanding of the laws (possibly through the help of an Overland Park Criminal Lawyer) that surround background checks to ensure you are in complete compliance.

Before you even begin, keep in mind that regardless of how you obtain information about an employee, you must still comply with federal laws put in place to protect prospective and current employees from discrimination. As an employer, you cannot discriminate in your hiring practices for reasons of national origin, religion, race, disability, color, family medical history, or for age over the age of forty, and you cannot collect information due solely to one of these factors.

Before you get any background information, you need to notify the employee that you are doing so, and that this information can or will be used to make employment decisions. When obtaining an investigative report, meaning using interviews with family members and associates, you must inform the prospective employee that they have the right to ask for a description of the investigation that lays out the nature and scope. However, snooping on a higher level and on VIPs would always result in a futile outcome because agencies like Los Angeles executive protection company are hired to keep all data confidential, and also to protect the one who hires these agencies.

In addition, you will need to obtain the employee’s or applicant’s written permission to perform a background check. Finally, you must certify to the vendor that will perform the background check that you have received said permission and have notified the prospective employee.

If you receive a negative background check for an applicant or employee, you must notify them in writing or verbally that any adverse action you take is a result of the information received.

Finally, any background information gathered must be retained for no less than one year. Once the year is up, the information can be disposed of in a secure manner including shredding, burning, or removing digital information so it cannot be reconstructed.
Background checks are an integral part of the hiring process. As long as you understand and follow all laws and regulations, you and your business should be well protected.

If you are interested in a personal background check for your records, apply here today.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).