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LAW OFFICE OF RAYMOND J. CANNON, JR., P.C.
Estate Planning, Elder Law, Medicaid-Long Term Care Planning,
Asset Protection Planning, Tax Planning, Real Estate,
Probate and Estate Administration |
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Our mission is to preserve and protect your assets. | |
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THE NUMBERS
Tax Changes for 2013
1. A higher tax rate of 39.6% (versus the previous maximum rate of 35%) applies to single filers with taxable income above $400,000, joint filers with taxable incomes above $450,000 and heads of households with taxable income above $425,000
2. The maximum tax rate on long-term capital gains increases from 15% to 20% for taxpayers above those same income levels.
3. A 3.8% surtax applies to the lesser ofnet investment or th amount by which a taxpayer's modified adjusted gross income exceeds $200,000 for single filers and heads of households and $250,000 for joint filers.
Note: You now may end up paying 43.4% on some of your income---not counting any state and local income taxes. |
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LAW OFFICE
OF
RAYMOND J. CANNON, JR., P.C.
Admitted
Massachusetts Bar
United States Tax Court
Federal District Court of MA
United States Supreme Court
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 3 YEAR REVIEWS We encourage you to take advantage of our free one-hour consultation to review your estate plan on your plan's third year anniversary. Please call 978-989-9999 for an appointment.
Please notify us at ray@rjcannonlaw.com
if your contact information has changed since your last visit.
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Please feel free to forward this Newsletter to your family, friends and associates who may be interested in a one-hour free consultation to discuss these topics. |
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JANE CONSIDERS WITHDRAWING FROM HER ROTH IRA
Jane called me to ask about the consequences of making withdrawals from her Roth IRA. I explained to her that two tests must be met: First, the distribution must be made after the end of the five-year period beginning with the first day of the taxable year for which any Roth IRA contribution was made and; second, one of the following conditions must be met:
- You must be 59 and ˝ or older when the distribution is made,
- You are disabled,
- You use the distribution to pay up to $10,000 of qualifying first-time home buyer expenses or,
- You are a beneficiary receiving distributions following the death of the account holder.
If these conditions are met, then the Roth IRA distribution is "qualified" and will be completely tax free
I explained to Jane that if she made her first IRA contribution for the 2008 tax year and she is 59 and ˝ years old, then the five-year threshold will have been met at the end of 2012 and the distribution in 2013 or later will be a tax-free qualified distribution.
I explained further that even if the Roth IRA distribution were not qualified, if your distribution does not exceed the total contribution to your Roth IRA, it is not taxable. Further, earnings on Roth IRAs are considered to be withdrawn last, after all contributions are taken into account.
LESSON: The rules about IRA distributions are complex and easily misunderstood. You should always consult with a competent CPA or tax attorney before considering such a withdrawal. If the distribution is not qualified, the earnings on the withdrawal are subject to tax and if you are under age 59 ˝, you may be subject to a 10% early distribution penalty.
If you are new to the Jane Chronicles, you may read past issues by going to our website:
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YOU CAN STRETCH AN IRA
One of the more powerful estate planning tools involves the use of the Stretch IRA.
Under the stretch strategy, required minimum distributions (RMDs) are calculated based upon the beneficiary's life expectancy. For example, say a 60 year old man inherits an IRA from his mother. He can schedule distributions over his 25 year life expectancy, as determined under the IRS tables. The first year after inheriting the IRA, the man would be required to withdraw only one-twenty-fifth(4%) of the accounts value. The following year, he would withdraw one-twenty fourth (4.17%) of the account value, and so on.
The real benefit of the stretch provision is that the longer the beneficiary's life expectancy, the smaller the amount he or she has to withdraw each year. This allows the bulk of the funds in that IRA to continue to grow tax-deferred. |
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Taxpayers who have used IRS to help prepare their returns are out of luck.
The agency will no longer be offering walk-in tax preparation assistance at its offices because of budgetary constraints. So the elderly, disabled, lower-incomers and others who've relied on this service in the past will have to find volunteer tax preparation sites
to get their returns done for free or alternatively spend money to hire a preparer.
Source: Kiplinger Tax Newsleter, 11/22/2013
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