Presented by Ed Slott, CPA and Jeffrey Levine, CPA Ed Slott and Company, LLC

Transcription

1 Presented by Ed Slott, CPA and Jeffrey Levine, CPA Ed Slott and Company, LLC

2 The Only Thing Constant is Change Each year the rules and/or the interpretation of the rules for retirement accounts change dramatically. There are always new Laws Revenue rulings Private letter rulings Tax Court cases IRS notices IRS announcements and other guidance

3 The New Once-Per-Year Rollover Rule Only one 60-day IRA-to-IRA or Roth IRA-to-Roth IRA each year Year = 365 days Trustee-to-trustee transfers do not count The following rollovers also do not count: Plan-to-IRA rollovers IRA-to-plan rollovers Roth IRA conversions

4 The New Once-Per-Year Rollover Rule Bobrow vs. Commissioner Tax Court ruled once-per-year rollover rule applies in aggregate to all a client s IRAs Decision was contrary to IRS own interpretation of the rule in Publication 590 and IRS proposed regulations

5 The New Once-Per-Year Rollover Rule IRS Announcement First post-bobrow guidance from IRS Multiple rollovers in prior years from different accounts ok Agreed to follow the Tax Court s ruling, but no earlier than 2015

6 The New Once-Per-Year Rollover Rule IRS Announcement (November 10, 2014) New interpretation of the once-per-year rollover rule will be effective January 1, 2015 Clients get a (somewhat) fresh start in day rollovers disregarded for NEW interpretation The once-per-year rollover rule applies in aggregate to clients IRAs and Roth IRAs Confirmed that IRA distributions as checks payable to new IRA custodian qualify as trustee-to-trustee transfers

7 Qualified Charitable Distributions NOT CURRENTLY IN EFFECT FOR 2014 OR BEYOND!!! But widely expected to be renewed retroactively for 2014 and at least through No guarantees though!

8 Qualified Charitable Distributions QCD vs. regular charitable contribution QCD No deduction Not added to income Regular charitable contribution IRA distribution added to income Itemized deduction Charitable deductions may be limited Clients may not itemize Does not prevent reduction of tax benefits tied to AGI/MAGI

9 Qualified Charitable Distributions Overview of key rules Must be 70 ½ or older on the date the QCD is made Funds must go right from an IRA owner s IRA to the charity Checks made payable to charity also qualify Can be made for up to $100,000 and is counted towards fulfillment of RMD Amount needs to be entirely deductible, had it been made with non-ira funds No concert tickets, books, CDs, DVDs or other gifts in return

10 Qualified Charitable Distributions Two QCD Strategies Wait-and-see Act-like-it s-already-there

11 New Reporting Requirements for Hard-to-Value Assets New reporting for IRS forms 5498, IRA Contribution Information 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc. Was optional for 2014 Mandatory beginning 2015

12 New Reporting Requirements for Hard-to-Value Assets Fair market value of IRA account must be reported to IRS each year on Form 5498 Fair value of only hard-to-value assets must also be reported each year, along with reporting type of hard-tovalue asset May require formal valuation each year Hard-to-value assets include: Non-publicly traded stock, Partnership or LLC interests, Real estate, options, and Other hard-to-value investments

13 Increased Scrutiny on Large IRAs IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed October 2014 Government Accountability Office (GAO) Report Government will forgo an estimated $17.45 billion in tax revenue in 2014 due to IRAs...the government forgoes millions in tax revenue....these large IRA balances by a small number of investors stands in contrast to Congress s aim...

14 Increased Scrutiny on Large IRAs The GAO report recommends the following: Approve plans to fully compile and digitize the new data from electronic and paper-filed Form 5498s to ensure the efficient use of the information on nonpublicly traded IRA assets. Conduct research using the new Form 5498 data to identify IRAs holding nonpublic asset types, such as profits interests in private equity firms and hedge funds, and use that information for an IRS-wide strategy to target enforcement efforts. Work in consultation with the Department of the Treasury on a legislative proposal to expand the statute of limitations on IRA noncompliance to help IRS pursue valuation-related misreporting and prohibited transactions that may have originated outside the current statute s 3-year window. *Emphasis added

15 Tax-Free Conversions of After- Tax Plan Funds IRS Notice Allows after-tax portions of plan distributions to be separated from pre-tax portions of plan distributions so they can be sent to a Roth IRA as a tax-free Roth IRA conversion The plan distribution is still pro-rata Does not apply to IRA distributions

16 Tax-Free Conversions of After- Tax Plan Funds IRS Notice Many plans won t offer participant s the ability to make two direct rollovers of the same distribution. If so, to complete a tax-free Roth IRA conversion, have the pretax portion of the client s distribution directly rolled over to a traditional IRA and the after-tax portion issued as a check payable to the client. Then complete a 60-day tax free conversion to a Roth IRA. Pre-tax amounts of a distribution are first allocated to direct rollovers, then to indirect (60-day) rollovers and then to amounts not rolled over.

17 Tax-Free Conversions of After- Tax Plan Funds Mega-back-door Roth Idea Make after-tax contributions to plan each year (if the plan allows) and the client has the discretionary to do so Subject to ACP test Target solo 401(k)s and plans where non-hce make significant contributions Subject to overall limit $52,000 for 2014 $53,000 for 2015 Take distributions of the after-tax contributions (and their earnings) as frequently as possible (if the plan allows) to complete tax-free Roth IRA conversions of the after-tax amounts.

18 5 Critical IRA Items to Check Before Year-End 1) Have clients maxed-out on retirement contributions? 2) Have beneficiary forms been reviewed? 3) Should you initiate a Roth IRA conversion? 4) Are clients behind on their estimated tax payments? 5) Have all RMDs been taken?

19 Maxed-Out Retirement Accounts? 2014 IRA contributions can generally be made up to April 15, 2015 Salary deferrals to employer-sponsored retirement plans for 2014 must generally be made in 2014 Many companies pay their bonuses around yearend. Encourage clients to use some of these newfound funds to save for their retirement.

20 Have Beneficiary Forms Been Reviewed? Have there been any Births Deaths Marriages Divorces Beneficiaries who have reached the age of majority Changes that would suggest the use of a trust as an IRA beneficiary (or suggest eliminating a trust as an IRA beneficiary)

21 Roth IRA Conversion Before Year-End? Can always be recharacterized up to October 15, 2015 As long as the funds leave a client s traditional account by December 31, 2014, it will be considered a 2014 Roth IRA conversion... Even if the funds don t get into the Roth IRA until 2015 May effectively turn the 5-year rule into a 4-year rule

22 Short on Estimated Tax Payments? Use This Trick! Take a distribution from the client s IRA for an amount equal to the estimated tax shortfall. Withhold 100% of the distribution Eliminates estimated tax penalty Withholdings are treated as paid in ratably throughout the year Take other, non-ira money and, within 60-days, rollover an amount equal to the distribution. Restores client s IRA and eliminates the tax on the distribution. ***Be careful of the once-per-year rollover rule***

23 Have All RMDs Been Taken? Verify that all RMDs have been correctly calculated Ensure that an RMD has been taken from each of a client s employer-sponsored retirement plans Exception RMDs for 403(b) plans can be aggregated Make sure that clients have taken a distribution from at least one of their IRAs large enough to satisfy the RMD requirement for all of their IRAs Double-check to make sure RMDs have been correctly distributed from any inherited retirement accounts a client may have

24 Introducing Savvy IRA Planning With Ed Slott and Company A comprehensive new resource to help you attract more clients, including: 4-part IRA webinar training series delivered by the Ed Slott and Company team (CE credit) 2 IRA seminar presentations to deliver to clients and prospects (FINRA - reviewed) 2 IRA study guides to support your learning and expertise Quarterly live webinars with Ed Slott and Company experts answering select subscriber questions Marketing toolkit to promote the seminar presentations IRA article reprints and IRA Boomer guides to hand out Plus, lots more. Program starts Feb. 1. Join now and save $500! Questions: IRA@horsesmouth.com More Info: 24