Birth and Adoption Exception – The tax law provides for several exceptions to the early-withdrawal penalty, and Congress has added another one as part of the Appropriations Act of 2020 (SECURE Act). The new exception provides for penalty-free plan withdrawals for births or adoptions, for distributions taken from IRAs, qualified employer plans (such as 401(k)s) and government retirement plans after Dec. 31, 2019. However, the maximum aggregate amount of a qualified birth or adoption distribution by any individual with respect to any birth or adoption is $5,000, applied individually (so each spouse may separately receive $5,000 of qualified birth or adoption distributions).
A qualified birth or adoption distribution is one made during the one-year period beginning on the date when a child of the individual is born or when the legal adoption of an eligible adoptee by the individual is finalized. An eligible adoptee means any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support. In addition, such qualified birth or adoption distributions may be recontributed to an individual’s applicable eligible retirement plan, subject to certain requirements. But remember that if the withdrawn funds are not recontributed to the plan, the distribution will be taxable.
Taxpayers are frequently blindsided when their filing status changes because of a life event such as marriage, divorce, separation or the death of a spouse. These occasions can be stressful or ecstatic times, and the last thing most people will be thinking about are the tax ramifications. But the ramifications are real, and the following are some of the major tax complications for each situation.
When was the last time you or your attorney reviewed or updated your will or trust? If it was before the passage of the 2017 tax reform legislation, or the Tax Cuts and Jobs Act (TCJA), your documents may be out of date. Among the many changes in that law was a more than doubling of the estate tax exemption. Prior to the TCJA, if the value of an individual’s estate at his or her death was about $5.5 million or more, it was subject to the estate tax. For deaths in 2020, and based on the TCJA inflation-adjusted amounts, just over $11.5 million is exempted from estate tax. So, if your will or trust was premised on the lower value, it may need to be revised so that it provides the appropriate estate tax results for your situation
Welcome to 2019 and a delayed provision of the tax reform, also known as the Tax Cuts and Jobs Act (TCJA). For divorce agreements entered into after December 31, 2018, or pre-existing agreements that are modified after that date to expressly provide that alimony received is not included in the recipient’s income, alimony will no longer be deductible by the payer and won’t be income to the recipient.
This is in stark contrast to the treatment of alimony payments under decrees entered into and finalized before the end of 2018, for which alimony will continue to be deductible by the payer and income to the recipient.
Having the alimony treated one way for one segment of the population and the exact opposite for another group of individuals seems unfair and may ultimately make its way into the court system. But in the meantime, parties to a divorce action need to be aware of the change and compensate for it in their divorce negotiations, for a decree entered into after 2018.
Taxpayers with disabilities may qualify for a number of tax credits and other tax benefits. Parents of children with disabilities may also qualify. Listed below are several tax credits and other benefits that are available if you or someone else listed on your federal tax return is disabled.
In the tax industry, we have been working to combat the threat of hackers for many years. When a security breach of the scope of the recent Equifax cyber security incident takes place, many clients are affected and concerned about how this may affect their financial lives.
What you need to know.
From May through July of 2017, Equifax reported unauthorized access to approximately 143 million American’s personal data, including names, social security numbers, birth dates, and in some instances driver’s licenses. In addition, some 209,000 credit card numbers were accessed.
If you are in the midst of a divorce, if one is on the horizon, or if you are involved in a dispute with an ex-spouse over the terms of your divorce, you need to be aware that divorce agreements establish your rights related to each other under state law but do not bind those who are not parties to the divorce, including the IRS, to the terms of the divorce.
As a result, the IRS will follow federal law as it applies to a tax issue and ignore what the divorce decree specifies. Where there is a dispute between ex-spouses over the application of federal tax law and the divorce decree, federal tax law will prevail, and if one spouse feels they are paying more taxes than they are supposed to, their only recourse is to go back to state court and seek a monetary award.