Tuesday, November 25, 2014

IRA Year-End Planning

Thanksgiving is this week.  December 1st is next week.  The holidays will be here before we know it and we will be ringing in 2015. As you plan your shopping and family gatherings, this is also a good time to start thinking of some year-end tax strategies that might benefit you.
  •  If you have multiple accounts, distributions do not need to be made from each account. You can total all your account balances (using last year's December 31 balances) and take the distribution from any account you choose. Just make sure you notify the custodians that you will satisfy your RMD from other accounts.
  • To calculate your RMD you can go online and search for RMD calculators, go to the IRS website at www.irs.gov and download publication 590 and use Table III in Appendix C, or contact your KOS advisor and they can provide you with a current table.
  • When taking a distribution, you must designate whether or not you want tax withheld. If you do not have tax withheld, any balance due because of the distribution will be payable when you file your tax return and might be subjected to underestimated penalties.
  • People are permitted to make a distribution and repay it within 60 days without tax or penalty. One strategy for those that underpaid their estimated taxes for 2014 is to take a distribution, have all or most of the money paid as withholding tax either to the IRS and/or your state; and then repay those funds from another source within 60 days. These withholding tax payments will be allocated by the taxing authorities as if they were made on time throughout the year and you'll avoid a penalty.
  • If you are in a low tax bracket this year, you might want to consider rolling over your traditional IRA to a Roth IRA. Once in the Roth IRA for five years, any distributions will always be tax-free and the RMD rules will not apply. All earnings in the Roth IRA will be income tax-free.
  • If you are still working and are not a more than 5% owner, you are not required to take RMD from your employer's 401(k) plan that you participate in.
Year-end planning with IRAs and retirement accounts is important and can provide opportunities to save substantial tax. Now is the time to contact your KOS advisor to help you work through any questions you may have.

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