Tag: tax advisor

March 25, 2020

I hope you and your families are doing well and staying safe & healthy!

Last week, the Families First Coronavirus Response Act was passed by Congress.  This Act requires businesses with fewer than 500 employees to provide paid sick and family leave to employees affected by the virus.  Details are below:

  • Full time workers must receive 80 hours of sick leave and part-time employees must receive pay in the amount of their average hours in a two- week period.
  • BENEFITS: There are three levels of eligible employees.  Those sick or quarantined would receive full pay up to $ 511 per day for up to 10 days.  Those caring for someone affected by the virus would receive 2/3 of their pay up to $ 200 per day for up to 10 days.  Individuals with childcare needs due to school or daycare closings will have a 10-day wait period and then receive 2/3 pay up to $ 200 per day, capped at a total of $ 10,000.
  • TAX CREDITS: Employers will receive dollar-for-dollar tax credits against Social Security and Medicare taxes due to offset the benefits paid.  Those taxes would normally be 6.2% of wages for Social Security and 1.45% for Medicare.
  • The self-employed are not left out. They would also receive tax credits against self-employment tax which are the same percentages shown above (6.2% and 1.45%)

As I write this, the Senate has come to an agreement on a separate $ 2 trillion stimulus bill and all indications are that the House will take up the bill immediately.  This bill is expected to include several measures that will affect individual income taxes.  Once this bill is officially passed, I will provide more details in a separate post.

We are committed to serving your tax preparation and tax planning needs.  If you have questions or need assistance, please do not hesitate to contact our office.

Stay safe and well.  Our thoughts and prayers are with everyone as we move through this crisis.

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

I hope you and your families are doing well and staying safe & healthy!

Just wanted to provide an update on our tax season operations given the extraordinary developments related to the coronavirus epidemic.

  • We are working as we normally would. I am in the Ballantyne office daily and my employee, Vicki continues to work from home.  You are welcome to set up an appointment, if needed and our receptionist is available if you wish to drop off your tax materials.
  • We successfully met the business tax filing deadline on Monday, March 16 and have now turned our attention to the individual tax deadline of April 15th.
  • Yesterday it was announced that Federal tax payments would be extended until July 15 without penalty. The April 15 filing deadline remains in place as of now.  It was unclear whether the payment extension applied to the first quarter estimated tax payments for 2020.  More information should be coming on that.
  • We are working diligently to prepare your tax returns on time. We will continue to monitor the situation and let you know if there are any other developments regarding this year’s tax deadline.

We are committed to serving your tax preparation and tax planning needs.  If you have questions or need assistance, please do not hesitate to contact our office.  We are still taking new clients and welcome your referrals as well.

Stay safe and well.  Our thoughts and prayers are with everyone during this crisis.

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

Roth Conversions

As more and more baby boomers continue to reach retirement age, many are looking at the benefits of converting traditional IRA accounts to Roth IRAs.  The way a Roth conversion works is that tax would be due on the converted amount since it was compiled with pre-tax dollars.  The Roth account would then grow tax-free and future distributions would be tax free.  Obviously, this only makes sense if you expect that your tax rates will go up in the future.

Of course, future tax rates are the big wild card!  No one can predict for sure where rates will go.  Some feel that with the national debt growing and massive Social Security liabilities coming due, that higher rates are inevitable.  They argue that folks should be taking advantage of today’s historically low rates.   The lower rates that came in with the Tax Cut and Jobs Act are temporary and generally have an end date of December 31, 2025.  So, could this be the day of reckoning?  Maybe.  But then again, President Trump has already floated the idea of making the TCJA tax cuts permanent, so maybe there is still hope?

The bottom line is that we have to work with the facts as they are now and determine if your particular situation is ideal for a Roth conversion.  Generally, if you are in the two lowest brackets of 10% and 12%, it would be wise to do only enough conversions to stay in that bracket.  The 12% bracket jumps up to 22% at taxable income of $ 78,950 for joint returns.

Another downside of conversions is that converted amounts need to be held five years to avoid a 10% penalty on withdrawals.  So, you would need to pay the taxes out of other funds, not the converted funds.  This could be a deal breaker for some.

Therefore, if you are wondering if a Roth conversion is right for you, the answer is the same as for most other tax situation: IT DEPENDS!  Every situation is unique so if you are considering this tax move, please give me a call.

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

Stretch IRA strategy curtailed under new law

Last month, in the midst of all the impeachment proceedings, Congress quietly passed legislation that would make significant changes to the tax laws governing retirement plans.

The most significant provision would require many beneficiaries of inherited IRAs to take out distributions over 10 years rather than their life expectancies.  This would significantly accelerate the taxation of these benefits and prohibit IRA owners from deferring taxes for long periods of time by leaving their accounts to young beneficiaries – the so-called Stretch IRA.  There would be exceptions to these distribution rules for surviving spouses, minor children, and heirs within 10 years of age of the original IRA owner.  IRAs inherited before 2020 would remain under the old law but the new law takes effect for IRA owners who die after December 31, 2019.

Here are some of the other highlights of the new legislation:

  • Starting in 2024, part-time employees would be allowed more access to 401(k) plans. Employers would be required to offer these plans to employees who work at least 500 hours per year for three years.
  • The age for making required minimum distributions from IRAs or 401(k) plans would increase from the current age 70 ½ to age 72. The new age limit would only apply to individuals who turn 70 ½ after December 31, 2019.
  • The age cap for making IRA contributions would be removed. This would allow workers to continue making retirement plan contributions after age 70 ½.
  • The bill would make it easier for employees to convert their retirement savings into a lifetime stream of income by purchasing annuities in a 401(k) plan. Employers would also be required to report to participants on an annual basis how much of an income stream that their retirement account balance represents.
  • In a move to assist families, the bill would allow penalty-free distributions of up to $ 5,000 from retirement plans if made within one year of the birth or adoption of a child.

This new legislation presents some tax planning opportunities.  With the Stretch IRA losing some of its punch, this may be a good time to review your beneficiary selections on IRA accounts.  Also, the new law does not require annual withdrawals during the 10-year payout period.  This would allow Roth IRA heirs, for example, to wait the full ten years before taking a withdrawal, which would allow for maximum tax-free growth.

As always, I am here to answer your questions about how these tax laws will affect you personally.

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

As the end of the year approaches, you may be looking for ways to lower 2019 taxes.  With the stock market near record highs, you may also be sitting on significant unrealized capital gains.  This may be the perfect time to turn your investments into tax deductions.

Her are two simple and often overlooked methods of accomplishing this.

Donation of appreciated stocks – Donations of appreciated stocks can be a tremendous tax saver.  Here’s how it works:  The appreciated stocks must be eligible for long term capital gain treatment which generally means they must be held for more than one year.  If given directly to the charity, you can deduct the full fair market value of the stocks and avoid capital gains taxes on the appreciation.

Qualified Charitable Distributions – These are direct transfers from an IRA directly to a qualified charity.  This tax break is only available to those age 70 ½ or older and is capped at an amount of $ 100,000 per individual per year.  QCDs are not included in the individual’s taxable income making the distributions tax-free.  There are two additional bonuses: QCDs can count toward the individual’s required minimum distributions and the donation can be made whether you are itemizing or not.

For more information about these and other tax saving moves, please contact my office at 704-887-5298 or david@davidrayecpa.com.

Contact

13850 Ballantyne Corporate Place, Ste. 500 Charlotte, NC 28277 Ph:704-593-9695

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