- Congress Adds More Uses for College Savings Plans (Sec 529 Plans)
- Congress originally created the Qualified State Tuition Plan, often referred to as the Sec 529 Plan, as a tax-beneficial incentive for parents, grandparents, and others to save money for an individual’s future college tuition and fees. There is no federal tax deduction for making contributions, but taxes on the earnings within a plan are not only tax-deferred while they are held in the account, they are tax-free when withdrawn to pay for qualified education expenses. Thus, the real tax benefit of these plans is the earnings within the plan accumulating tax-deferred and then being tax-free when withdrawn if used for college tuition and related qualified expenses.
- New Twist Added to the IRA-to-Charity Provision
- Ever since 2006, individuals age 70½ or older have been able to transfer up to $100,000 annually from their IRAs to qualified charities.
- No Employees This Quarter? You Still May Need to File IRS Form 941
- As an employer, you have plenty of obligations when it comes to filing taxes. Among these is the need to file IRS Form 941, the Employer’s Quarterly Federal Tax Return, on the last day of each month following the end of a quarter. Sticking to these deadlines — April 30, July 31, Oct. 31 and Jan. 31 — is essential for remaining in compliance and avoiding an inquiry from the Internal Revenue Service.
- Congress Removes IRA Contribution Age Restriction
- In the past, unlike Roth IRAs, which have no age restriction associated with making a contribution, taxpayers were unable to make a traditional IRA contribution in and after the year they reached the age of 70½. This is primarily because a Roth IRA contribution is not tax deductible, while a traditional IRA is, unless it is phased out for higher income taxpayers.
- Childbirth and Adoption Penalty Exception Added
- If you are looking for cash for a specific purpose, your retirement savings may be a tempting source. However, if you are under age 59½ and plan to withdraw money from a traditional IRA or qualified retirement account, then you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out. Withdrawals you make from a SIMPLE IRA before age 59½ and during the two-year rollover-restriction period after establishing the SIMPLE IRA may be subject to a 25% additional early-distribution tax, instead of the normal 10%. The two-year period is measured from the first day when contributions are deposited. These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.
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