There will be some changes next year to how many traditional IRA rollovers within sixty days each taxpayer can make in a year. The IRS has made some new rules based on new tax court rulings which are detailed in this article in the Wall Street Journal by Karen Damato: http://blogs.wsj.com/totalreturn/2014/11/11/irs-unveils-new-ira-rollover-rules/?mod=WSJ_hpp_sections_yourmoney To be safe on the new rules, it is just easier to make a direct transfer of one IRA to another instead of messing with a rollover. It is done quickly and you don’t have to remember to go to another bank with a cashiers check to set things up within sixty days. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa
CPA Tax Musings: S Corporation Compensation vs. 401K Contributions
Before the year ends, one thing I have been doing a lot of is year end business planning. I have a lot of entertainment and professional clients with S Corporations that need a sitdown meeting to decide how much compensation they need to take to meet the reasonable compensation rules, plus they have solo 401K retirement plans that they want to contribute to. This is where a decision has to be made – take the absolute minimum reasonable compensation (I have software that can calculate a compensation amount) and possibly forgo some 401K contributions. If my clients want to maximize their 401K contributions, they will need to take $138,000 in wages (the passthrough profit on the S Corporation K-1 doesn’t count) to get the maximum 25% employer contribution of $34,500 (138,000 x 25%). That plus the $17,500 maximum employee deferral ($23,000 if over 50) gets them the maximum contribution of $52,000 ($57,500 if over 50). The offshoot is that on the first $117,000 of wages the client will owe 15.3% of social security tax (12.4% FICA and 2.9% Medicare) but will get a tax savings on all the 401K contributions (if a California resident probably 35% of the contribution.) [...]
CPA Financial Musings: Is a nondeductible IRA contribution worth the trouble?
If you have a 401k and have a certain amount of income, you might not be able to contribute to a traditional or Roth IRA. If you have some additional money you want to put into retirement, there is the nondeductible IRA. Anyone with $5500 in earned income can make a nondeductible IRA contribution. The bad news – you don’t get a contribution deduction and have to track your contribution basis in the IRA. The good news – you still get tax deferred growth on the earnings in the account, just like a regular IRA. See this article in Market Watch by Kenneth Roberts for more details: http://www.marketwatch.com/story/is-a-nondeductible-ira-contribution-worth-the-trouble-2014-11-07 Anyway, over time the tax deferred earnings growth could significantly increase your earnings by not requiring you to pay tax on the earnings until you withdraw them – that is definitely a good point. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa