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Tag Archives: IRA

Read This First Before Tapping Your Retirement Savings

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on March 8, 2022 by Lake Wylie Tax Services StaffMarch 8, 2022

Read This First Before Tapping Your Retirement SavingsYour 401(k), IRA or other retirement accounts may be a tempting source for cash if you find yourself short of funds or have a major purchase you are considering. But withdrawing money from a traditional IRA or qualified retirement account before you reach age 59 1/2 may not be the best idea, as you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out.

Withdrawals you make from a SIMPLE IRA before age 59 1/2, and those you make during the 2-year rollover restriction period after establishing the SIMPLE IRA, may be subject to a 25% additional early-distribution tax instead of the normal 10%. The 2-year period is measured from the first day that contributions are deposited.

These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.

Thus, before making any withdrawals from a traditional IRA or other retirement plans, including a 401(k) plan, a 403(b) tax-sheltered annuity plan, or a self-employed retirement plan, there are two things you should carefully consider: (1) you are taking funds, and their future appreciation, from your retirement savings which can impact your future retirement lifestyle. (2) You will be creating unnecessary taxes and penalties which will increase the amount you will need to withdraw to obtain your needed funds.

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Posted in Retirement Planning, Tax Central | Tagged IRA, Retirement, Tax Planning

Required Minimum IRA Distributions Will Resume in 2021

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on March 4, 2021 by Lake Wylie Tax Services StaffMarch 4, 2021

Calculating Required Minimum IRA DistributionAs part of the CARES Act, the requirement for older taxpayers to take required minimum distributions (RMDs) from their retirement plans was waived for 2020. This primarily was due to the anticipated drop in value for most investments as a result of the economic effects of COVID-19, which actually did not materialize.

So, barring any extension of the 2020 moratorium by Congress, RMDs must be resumed for the 2021 tax year.

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Posted in Retirement Planning | Tagged IRA, Retirement, RMD

IRA Withdrawal Planning Can Save on Taxes

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on December 21, 2020 by Lake Wylie Tax Services StaffDecember 21, 2020

IRA Withdrawal Planning Can Save on TaxesAdvance planning can, in many cases, minimize or even avoid taxes on IRA distributions and other qualified plan distributions. When contemplating future retirement and when to begin tapping taxable IRA and other qualified retirement accounts, taxpayers need to consider a number of important issues.

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Posted in Retirement Planning | Tagged IRA, Tax Planning

Keeping Your Designated IRA Beneficiary Current is Important

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on September 29, 2020 by Lake Wylie Tax Services StaffSeptember 29, 2020

Update your IRA BeneficiariesKeeping your designated IRA beneficiary current is very important. You may not want your account going to your ex-spouse, and you certainly do not want a deceased individual to be your beneficiary.
What’s more, a periodic review of your named IRA beneficiaries is vital to ensure that your overall estate planning objectives will be achieved in light of changes in the performance of your IRAs and your personal, financial, and family situations. For example, if your spouse was named your beneficiary when you first opened the account several years ago and you’ve subsequently divorced, your ex-spouse will remain the beneficiary of your IRA unless you notify your IRA custodian to change the beneficiary designation.

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Posted in Retirement Planning | Tagged IRA

What’s Best for You – Traditional or Roth IRA?

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on April 28, 2020 by Lake Wylie Tax Services StaffApril 28, 2020

Traditional or Roth IRAThe tax code offers two types of IRAs; one is referred to as the traditional individual retirement account (IRA), so named because it was the first type of IRA available, having been created by Congress back in the 1970s. The second type is the Roth IRA, established in 1997 and named after William Roth, who was a senator from Delaware. Which one is best for you?

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Posted in Retirement Planning | Tagged IRA, Retirement, Roth IRA, Traditional IRA

Thinking of Tapping Your Retirement Funds Early? What You Need To Know

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on November 21, 2018 by Lake Wylie Tax Services StaffNovember 21, 2018

RetirementIf you are suddenly in need of a substantial amount of cash, probably the last thing you should do is tap your retirement funds. They are the key to a financially comfortable retirement. The younger you are, the less likely you are to think about saving for retirement, but you certainly don’t want to end up living off of only Social Security. However, there are times when there might not be any other alternative than dipping into your 401(k), IRA or other retirement plan. In that case, you have to be concerned not only with any tax liability, but also early withdrawal penalties if the funds are withdrawn before reaching age 59 1/2 Plus, some distributions may only be partially taxable and some not taxable at all, while others are fully taxable.

Like everything in the U.S. tax code, the rules relating to pension or other retirement plan distributions are complicated and governed by a variety of provisions. This article describes these various rules so you can see how they would apply to a withdrawal you might be contemplating.

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Posted in Retirement, Retirement Planning | Tagged Early Withdrawal from Retirement Account, IRA

Making Two IRA Rollovers in One Year Can Be Costly

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on October 3, 2018 by Lake Wylie Tax Services StaffJanuary 23, 2020

Tax law permits you to take a distribution from your IRA account, and as long as you return the distribution to your IRA within 60 days, there are no tax ramifications. However, many taxpayers overlook that you are only allowed to do that once in a 12-month period, and violating this rule can have some nasty and unexpected tax ramifications.

The one-year period is measured based on the date a distribution is received. If the second distribution is received before the same date one year later, it is a disqualified rollover.

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Posted in Retirement, Tax Central | Tagged IRA

IRA Missteps to Avoid

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on August 23, 2018 by Lake Wylie Tax Services StaffJanuary 23, 2020

IRA Missteps to AvoidIf you have an IRA account or are considering one, there are a number of potential missteps you will want to avoid. Some of them can lead to unwanted taxes and penalties, and of course, we are talking about your retirement funding, so it is an important issue. Here are a number of issues to keep in mind:

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Posted in Retirement Planning | Tagged IRA
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