Monthly Archives December 2011

The IRA Charitable Rollover

Posted by mikbon12    Posted in Uncategorized    Posted in December 20, 2011    |    No Comments

Only a couple of weeks left for IRA holders over the age of 701/2 to take advantage of the charitable rollover due to expire at the end of the year.

This option, first available in 2006 would have expired in 2007 but was extended through to 2008 and 2009 then again through 2010 and 2011.

• It allows those 701/2 and older to donate up to $100,000 directly to a charity without having to claim the distribution as income.
* The donation can be used to offset required minimum distributions.
* Gifts can be made to as many charities as desired as long as the total does not exceed $100,000.
* A spouse can also give $100,000 from their IRA
* The gift cannot be given in exchange for a charitable gift annuity or charitable remainder trusts, pooled income or donor advised funds.

Because the gift is not treated and taxed as income there are no further tax deductions available on the gift however, the donation is not added to your adjusted gross income.

Keeping the distribution out of your adjusted gross income might result in a lower tax rate and the donation might help reduce your estate value for estate tax calculation.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your individual tax issues with a qualified tax advisor.

Beware of Double Taxation in IRA’s

Posted by mikbon12    Posted in baby boomer retirement, baby boomers, estate planning, financial planning, IRA planning, IRA's, life planning, men retirement, News, preparing for retirement, retirement, retirement income, retirement planning, retirement ready, retitrement, Uncategorized, women retirement    Posted in December 5, 2011    |    No Comments

Without good recordkeeping you might face double taxation on certain IRA distributions. The amount of a contribution to a traditional IRA that is tax deductible is based on income and qualified plan participation. Contributions that do not qualify for a deduction could be made to a traditional IRA as an “after tax” deduction. The growth on the contribution is be tax deferred until withdrawn, at which time it would be taxed as income. The basis, the “after-tax”, contribution is not taxed again and distributed tax-free.

The problem comes with record keeping and reporting the basis. Unless the non-deductible contribution had been reported with your tax filing to the IRS, the distribution will be considered taxable. Most custodians do not keep track of these contributions so it is the responsibility of the taxpayer to maintain these records.

Upon distribution the amount will be made up of tax-free (return of basis) and taxable (deductible contributions, earnings and gains) until all basis has been distributed. Once the basis is depleted distributions will be fully taxable.
Not only does the potential for double taxation exist while you are alive but your beneficiaries will need to be aware of any “after tax” contributions to avoid the same double taxation issues.

It is important the beneficiary is aware of any basis in the inherited IRA. The assumption will probably be that all contributions are pre-tax and subject to taxation upon withdrawal. Documentation for non-deductible contributions should be included with other estate planning documents.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your individual tax issues with a qualified tax advisor.