Category Archives: Tax Planning

WMA Newsletter – November/December 2016

WEALTH MANAGEMENT ADVISOR

 November/December 2016

Here’s a brief glance at what you’ll find in the November/December issue…

 

When should you pull the trigger on Social Security benefits?

When is it appropriate to start collecting Social Security benefits? As this article discusses, the answer to that question depends on such factors as the amount of benefits, additional assets, life expectancy and marital status. Individuals are also encouraged to consider the effect of earnings if they plan to work while receiving benefits. A table shows how full retirement age is determined.

 

Falling markets, though inevitable, provide opportunities

Investors don’t necessarily have to suffer when markets are volatile. As this article explains, investors with long-term objectives and broadly diversified portfolios can probably ignore short-term market fluctuations. In fact, volatility can provide opportunities to invest in stocks that previously were too expensive. Taking advantage of such buying opportunities may position investors for better performance.

 

Weighing the pros and cons of LTC insurance

Few people want to think about the possibility that they might need long-term care (LTC). But it’s important to do so, and LTC insurance can help. This article weighs the benefits of LTC insurance with the cost of the premiums and explains some of the terminology used in LTC policies.

 

Self-directed IRAs: Watch out for these 3 tax traps

Although self-directed IRAs enable account holders to invest in nontraditional assets such as real estate, they also contain several potential tax traps. This short article warns about unrelated business taxable income, unrelated debt-financed income and prohibited transactions.

 

To view a PDF of the newsletter with full articles visit our Web site

 

September/October 2016 WMA Newsletter

160901 WMA Newsletter

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Articles Include:

Six Classic Techniques for Protecting Your Assets

ABLE Accounts: Families of disabled children have another estate planning option

Plan now to reduce your Net Investment Income Tax exposure

Buy LOW, Sell HIGH: A primer on value investing

 

Please call us at 978-970-3400 if you have any questions or would like us to evaluate how any of this may apply to your situation.

Wealth Management Advisor, May/June 2016

160501 WMA Newsletter

(Click Above)

 

Articles Include:

International Estate Planning: How to avoid tax traps

Taxable vs. tax-advantaged: Where you hold your investments matters!

Protect your self from tax identity theft

Should you “undo” a Roth IRA conversion?

Boston CPA & Financial Planner Personal Record Retention Guide

Boston CPA and Financial Planners at Wealth Management Advisors, LLC and Sullivan Bille PC present a Personal Record Retention Guide.

As the calendar turns, you may find yourself looking forward to tax preparation season.  OK, maybe not “looking forward to”, but it will soon be time to dig through your paperwork and pull together the items needed for tax preparation.  A question that typically arises this time of year is “how long do I have to keep (insert document name here)”.  Please see below for some guidelines.  As always, please give us a call if you have any questions.

 Record Retention Guide for Individuals

 

INDIVIDUAL RECORDS                                              SUGGESTED RETENTION PERIOD

Tax Return Copies                                                           Permanent

Medical Receipts                                                             7 Years

Forms 1099 Received                                                      7 Years

Forms W2 Received                                                        Permanent

401 K/Keogh Statements                                                 7 years following disposition, termination, payoff

IRA Statements (deductible & nondeductible)                7/Permanent

Loan Records / Forms 1098                                             7 years following disposition, termination, payoff

Annuity Year End Statements                                          7 years following disposition, termination, payoff

Insurance Policies – Life                                                  Permanent

Insurance Policies – Other                                                7 years following disposition, termination, payoff

Major Purchase Receipts                                                  7 Years

Year-end Brokerage Statements/Trade Confirmations    7 Years

Certificates of Deposit Statements                                   7 Years

Schedule K-1’s from Partnership or S Corporation         7 Years following disposition, termination, payoff

House Records (cancelled checks for purchase of major improvements and maintenance)                                                                    Permanent

Birth and Death Certificates                                             Permanent

Medical Records                                                               Permanent

Wills                                                                                  Permanent

Trust Agreements                                                              Permanent

Detailed List of Financial Assets Held                              Permanent

Alimony, Custody or Prenuptial Agreements                    Permanent

Military Papers                                                                   Permanent

Photos or Videotape of Valuables                                      Permanent

2013 Tax Changes for Filing Your Tax Return

For a number of years we watched as the brinkmanship in Washington led to last minute and harried tax changes.  In 2013 some of these went into effect and you should keep them in mind as you look to prepare for your 2013 tax filings.

The passage of the American Taxpayer Relief Act of 2012 (ATRA) permanently extended the Bush tax cuts, unless you are a high income taxpayer.  A new Net Investment Income tax was applied and an additional Medicare Tax levy will also affect those in the higher income levels. Additionally, same sex married couples got equal treatment under the law and can file “Married filing jointly.”

With those changes and many more hitting us in 2013, compounded with the Government Shutdown, we are on track for a delayed and complicated filing season.  If you prepare your taxes yourself, software is recommended, but be sure to update it and wait to file your return for a bit until they work the changes through the system.  If you are using a professional preparer (like us!), be sure to get your information in by the end of February so we can get a jump on things and keep the process moving forward.  Further, if you file financial aid forms for education, remember to file with estimated numbers and then you can update your FAFSA or Profile applications with the actual numbers once they are available.

The tax laws are not getting any easier so be sure to call us with questions.  Tax simplification seems to be far away and certainly won’t help us this year!  Remember, proper planning and preparation can propel a princely refund, or at least solid tax savings!

If you want a brief guide to 2013 tax rules and changes, give us a call at 877-448-3400 or email us at info@wmallc.com.

Year End Giving

It’s that time of year again!  The holiday season seems to have approached more quickly than ever this year!  Since this is the season of giving, we’d like to take this opportunity to quickly review the gift tax rules as they pertain to family wealth transfers without the imposition of a gift or transfer tax.

ANNUAL GIFTING

In 2013, each person has the ability to transfer a maximum of $14,000 per year to anyone they choose on a transfer tax free basis.  This means that a married couple can give a maximum of $28,000 to each family member.  Best of all, these transfers are not subject to the Gift Tax Transfer System, which currently imposes a tax of up to 35% of the fair market value of the assets transferred.

Something to think about when considering an annual gifting program is that the gifts are made with no strings attached.  Accordingly, your heirs can use the gift for any purpose they choose.  Of course, since gifting is an annual decision, you can decide to discontinue future gifts at any time if you feel they are causing more harm than good.  If inappropriate gift consumption is a concern, contact us and we’d be happy to get together to discuss alternative gifting strategies that do have strings attached.

A final note on annual gifting…..it is most advantageous to gift cash.  A gift of appreciated securities, for example, brings with it an eventual income tax liability since the recipient assumes the cost basis for any assets received.  In other words, it’s akin to gifting 80 to 85 cents on the dollar (depending on your tax bracket), rather than 100.

EDUCATION AND MEDICAL EXPENSE ASSISTANCE

One of the most advantageous (and least publicized) tax free gifting strategies pertains to educational and medical costs incurred by others.  Transfers made for these purposes are gift tax free and do not count toward the $14,000 annual gift tax exclusion mentioned above.  But just like most other IRS matters, there is a catch.  The transfers made for educational and medical purposes must be paid directly to the provider.  In other words, funds cannot be transferred to your children and they, in turn, pay their educational or medical provider.  Even considering the small administrative hassle, the benefits of paying for these type on expenses is significant.  Any funds that are used for this purpose completely avoid the Transfer Tax System, saving up to 35% in gift/estate tax.

If either of these strategies has piqued your interest, please do not hesitate to call so we can customize a gifting strategy to meet your specific goals.

2014 IRA and Retirement Plan Limits

IRA contribution limits

The 2014 IRA and Retirement Plan Limits are important to understand. The maximum amount you can contribute to a traditional IRA or Roth IRA in 2014 remains unchanged at $5,500 (or 100% of your earned income, if less). The maximum catch-up contribution for those age 50 or older in 2014 is $1,000, also unchanged from 2013. (You can contribute to both a traditional and Roth IRA in 2014, but your total contributions can’t exceed this annual limit.)

Traditional IRA deduction limits for 2014

The income limits for determining the deductibility of traditional IRA contributions have increased for 2014 (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income (“modified adjusted gross income,” or MAGI) is $60,000 or less (up from $59,000 in 2013). If you’re married and filing a joint return, you can fully deduct your IRA contribution if your MAGI is $96,000 or less (up from $95,000 in 2013). If you’re not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $181,000 or less (up from $178,000 in 2013).

If your 2014 federal income tax filing status is:
Your IRA deduction is reduced if your MAGI is between:
Your deduction is eliminated if your MAGI is:
Single or head of household

$60,000 and $70,000

$70,000 or more

Married filing jointly or qualifying widow(er)*

$96,000 and $116,000 (combined)

$116,000 or more (combined)

Married filing separately

$0 and $10,000

$10,000 or more

*If you’re not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $181,000 to $191,000, and eliminated if your MAGI exceeds $191,000.

Roth IRA contribution limits for 2014

The income limits for Roth IRA contributions have also increased. If your filing status is single/head of household, you can contribute the full $5,500 to a Roth IRA in 2014 if your MAGI is $114,000 or less (up from $112,000 in 2013). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $181,000 or less (up from $178,000 in 2013). (Again, contributions can’t exceed 100% of your earned income.)

If your 2014 federal income tax filing status is: Your Roth IRA contribution is reduced if your MAGI is between: You cannot contribute to a Roth IRA if your MAGI is:
Single or head of household

$114,000 and $129,000

$129,000 or more

Married filing jointly or qualifying widow(er)

$181,000 and $191,000 (combined)

$191,000 or more (combined)

Married filing separately

$0 and $10,000

$10,000 or more

Employer retirement plans

The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan in 2014 remains unchanged at $17,500. The limit also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Savings Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $5,500 to these plans in 2014 (unchanged from 2013). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($17,500 in 2014 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan–a total of $35,000 in 2014 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2014 is $12,000, unchanged from 2013. The catch-up limit for those age 50 or older also remains unchanged at $2,500.

Plan type: Annual dollar limit: Catch-up limit:
401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Savings Plan

$17,500

$5,500

SIMPLE plans

$12,000

$2,500

Note: Contributions can’t exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2014 is $52,000 (up from $51,000 in 2013), plus age-50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2014 has increased to $260,000, up from $255,000 in 2013; and the dollar threshold for determining highly compensated employees remains unchanged at $115,000.

 

Copyright 2006-2013 Broadridge Investor Communication Solutions, Inc. All rights reserved

IRS and Treasury Department Provide Guidance on Same-Sex Marriage

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have announced that same-sex couples who are legally married in jurisdictions that recognize same-sex marriage will be treated as married for all federal tax purposes. Guidance has been provided in the form of a Revenue Ruling (Rev. Rul. 2013-17) and associated Frequently Asked Questions.

State granting marriage is key, not state of residence

If a same-sex couple is legally married in a state that recognizes same-sex marriage, the couple will be treated as married for all federal tax purposes. This is true even if the couple resides in a state that does not recognize same-sex marriage. So, a same-sex couple legally married in a state that recognizes same-sex marriage, but residing in a state that does not recognize same-sex marriage, will be treated as married for federal tax purposes even though it’s possible the couple may not be treated as married for state tax purposes. Recognition also applies to same-sex couples legally married in the District of Columbia, a U.S. territory, or a foreign country.

Registered domestic partnerships, civil unions, and other formal relationships recognized under state law do not qualify–only couples legally married under state law will be treated as married for federal tax purposes.

Applies for all federal tax purposes

Legally married same-sex couples are treated as married for all federal tax purposes. This applies for federal estate and gift tax purposes, and for federal income tax purposes, including:

  • Filing status issues
  • Personal and dependency exemptions
  • Standard deductions
  • Employee benefits
  • IRA contributions and deductions
  • The earned income tax credit (EITC)
  • The child tax credit

2013 tax year implications

If you are legally married on the last day of the year, you generally have to file your 2013 federal income tax return as a married individual. That means same-sex couples treated as married for federal income tax purposes will generally have to choose whether to file their 2013 federal income tax return as married filing jointly, or as married filing separately.

Prior tax years

If you were married prior to 2013, you may also amend prior year federal income tax returns, choosing to be treated as married for federal income tax purposes (assuming that you were legally married on the last day of the tax year(s) being amended). You’re only able to file an amended return, however, for any tax year still open under the statute of limitations. Generally, the statute of limitations for filing a refund claim is three years from the date a return was filed, or two years from the date tax was paid, whichever is later. For most individuals, that means claims can still generally be filed for tax years 2010, 2011, and 2012. You are not required to amend a prior year return, however.

It’s important to note that if you choose to amend a prior year federal income tax return in order to be treated as married, all items on the return must be adjusted to consistently reflect your marital status (i.e., married filing jointly or married filing separately). That is, if you amend a prior year tax return to be treated as married, you are treated as married for all items and issues related to the return.

Note: If your employer provided health coverage for your same-sex spouse and included the value of that coverage in your adjusted gross income (AGI), amending your prior year return to reflect your status as a married individual may allow you to recover the income taxes paid on the value of this coverage. Similarly, if you paid premiums for health-care coverage for your same-sex spouse with after-tax dollars, you may be able to reduce your income by these premium amounts.

Note: For tax year 2012, same-sex spouses who filed their federal income tax returns before September 16, 2013 (the effective date of the Revenue Ruling) may choose–but are not required–to amend their 2012 federal income tax returns to file as married (i.e., married filing jointly or married filing separately). Same-sex spouses who file an original federal income tax return for the 2012 tax year (or for any prior tax year, for that matter) on or after September 16, 2013, will not have a choice–if legally married for the tax year, they will generally have to file their federal income tax return as married filing jointly or married filing separately.

No Rendering of Advice The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a qualified professional accountant.
Presentation of the information is not intended to create, and receipt does not constitute, an accountant-client relationship. Internet subscribers, users, online and other readers are advised not to act upon this information without seeking the service of a professional accountant.
Any U.S. federal tax advice contained in this document is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.
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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013.