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How to Reduce Required Minimum Distributions (RMD) and Extend Your Retirement Benefits

Use a Qualified Longevity Annuity Contract

Are you one of the boomer generation and find that your required minimum distributions (RMDs) from qualified plans and IRAs are providing unneeded income (along with a high tax bill)?   Are you also afraid that the government’s RMD requirements will leave too little in your retirement plan for your later years?   You can use a qualified longevity annuity contract (QLAC) to reduce your RMDs and extend the life of your retirement distributions. 

How to Keep Your QuickBooks Data Safe

Great QuickBook Internal Safeguards & Tips

Keeping QuickBooks data is accurate takes time – let’s be sure it’s safe!

Your QuickBooks company file contains some of the most sensitive information on your computer such as customers’ credit card numbers and employees’ Social Security numbers.  An intruder who captured all that data could create tremendous problems for you and a lot of other people.

Who Controls the Funds in a Section 529 Plan?

Information Regarding Saving for a Child’s Future Education

This question frequently arises: Who controls the funds held in a Section 529 qualified tuition account? These accounts can become quite large, as they are limited only by the projected cost of a college education, and those costs will vary between state plans.  Some states base their maximums on the cost of an in-state, four-year education, but others use the cost of the most expensive schools in the U.S.—including graduate studies. Most have limits in excess of $200,000, and some can reach $475,000 or more.  Thus, it is only natural that those who fund an account would be concerned about who controls the account’s distributions.  This is especially true when grandparents or others are making contributions to an account that is limited only by gift-tax considerations.

An Overview of Trump’s Tax Proposals

What The Tax Proposals Mean to You and Your Business

On April 26, 2017, the Trump administration provided information on proposed tax law changes, many of which mirror his previous tax policy statements.  Although lacking in significant detail, here is what the president proposes and how it might impact your tax liability:

Business Tax Rates – Trump’s proposal would cut the top rate on corporate taxable income from 35% to 15%. Presumably, the 15% rate would apply to all business income, including small family-owned businesses.

Individual Tax Rates – Under Trump’s proposal, there would only be three tax brackets, 10, 25, and 35%, down from the current seven tax brackets: 10, 15, 25, 28, 33, 35 and 39.6%. The brackets are applied in steps, so as a taxpayer’s income increases the increase is taxed at increasingly higher rates. The table below illustrates the current 2017 tax brackets.

The current proposal generally mirrors the rates Trump proposed while on the campaign trail. Under the previous proposal, for married taxpayers filing jointly, the lowest rate would apply to income less than $75,000; the 25% rate would apply to income more than $75,000 but less than $225,000; and the 33% rate would apply to income of more than $225,000.  Brackets for single filers were 1/2 of joint filer amounts.

However, the income brackets where the rates apply have not been specified in the current proposal and are subject to negotiations with Congress. Regardless, the reduction of the top tax rate from 39.6 to 35% will provide a huge tax saving for wealthy taxpayers.

Standard Deduction – Trump originally suggested a standard deduction of $25,000 for singles and $50,000 for married couples.  He has since toned that down and is now proposing to double the standard deduction, which is currently (2016) $12,600 for a married couple filing jointly and $6,300 for single taxpayers. Under Trump’s proposal the standard deductions would increase to approximately $24,000 for married couples and $12,000 for single taxpayers.  According to an estimate by the nonpartisan Tax Policy Center (TPC), 27 million (60%) of the 45 million filers who would otherwise itemize in 2017 would opt for the standard deduction. This change would generally provide a small tax benefit to lower-income taxpayers.

Itemized Deductions – During the campaign, Trump proposed limiting itemized deductions to $100,000 for single filers and $200,000 for joint filers, which would cause an increase in taxes for the wealthiest taxpayers and not impact middle-income taxpayers.  However, the current proposal would do away with all itemized deductions except those that incentivize home ownership and charitable deductions. The theory is that the other deductions primarily benefit the wealthiest taxpayers.  However, this would also have a significant impact on other taxpayers as well.  Here are a few examples of its effects:

  • Medical deduction – Medical deductions would be eliminated, impacting seniors with significant medical costs during the year.
  • State & Local Tax – Taxpayers living in states with income tax would no longer be able to deduct the state and local income taxes they pay.
  • Employee Business Expenses – It would also eliminate the deduction for employee business expenses.
  • Recreational Gambling – Those who are recreational gamblers would have to pay taxes on all their winnings and would not be able to deduct losses.

Other Deductions – Under the Trump proposal, virtually all deductions other than retirement savings would be eliminated.  If that is the plan, then presumably it would include moving deductions, educators’ expenses, self-employed health insurance, student loan interest, and alimony paid.  None of these changes would provide any significant benefit to the wealthy but would impact lower-income taxpayers.

Alternative Minimum Tax (AMT) – Trump would eliminate the AMT, which primarily impacts wealthier taxpayers.

Estate Tax – The estate tax would be eliminated, which applies to wealthy taxpayers with taxable estates in excess of $5,450,000 (2016).  The number of taxable estates in the U.S. per year is just over 10,000.

This proposal was presented as a one-page outline without any fundamental details.  Assuming the proposal is not dead on arrival, expect significant changes to be made by Congress. For instance, the senators and representatives from states with income tax will certainly want to retain state income tax as an itemized deduction for their constituents, including both Democrats and Republicans. And of course, there needs to be replacement revenue for the cuts to avoid a national debt increase.

As the tax reform debate winds through Washington, rest assured we will stay on top of the latest proposals and final legislation.  We will continue to keep you informed during this wild ride.

Trumps Rate Schedule

Are You Getting A Tax Refund for 2016?

Checking the Status of Your Federal Tax Refund is Easy

If your 2016 federal return has already been filed and you are due a refund, you can check the status of your refund online.

Where’s My Refund?” is an interactive tool on the IRS web site at IRS.gov.  Whether you have split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, “Where’s My Refund?” will give you online access to your refund information nearly 24 hours a day, 7 days a week. 

2016 Tax Filing Deadline is April 18th

If you haven’t filed your 2016 tax return, April 18, 2017 is the due date to either file your return and pay any taxes owed, or file for the automatic six-month extension and pay the tax you estimate to be due. The due date is normally April 15, but the 15th falls on a weekend and the next business day, April 17, is Emancipation Day, a legal holiday in Washington D.C., so the due date in 2017 is April 18.

Why Do Small Businesses Fail?

Common Reasons Small Businesses Fail

Many people dream of starting a small business.  This is a dream that can become a reality, or, as happens to about 33% of prospective business owners, according to the Small Business Administration – it can result in dismal failure within two years.  There’s no magic-bullet solution to ensure a successful business, but if you don’t want to be in that 33%, you should be aware of the common reasons that small businesses fail.