Rollover your 401(k) and distribute your company’s appreciated stock via “Net Unrealized Appreciation” (NUA). This cuts your taxes in half from high ordinary rates (39.6% +) to low capital gains rates (0%, 15%, 20%). It also avoids the Net Investment Income Tax Rate (3.8%). I’ve heard enough, I want to schedule a call…
We’re in a Bull-Market right now, and stocks are likely moving even higher. This presents an excellent tax-planning opportunity for the company stock in your 401k. If you are a retiree, listen up. An important question to ask is how do I get the most out of my retirement account? Oftentimes the simplest factor is income tax. Unfortunately, clients often review income taxes after the end of the tax year. However, by then, its often too late. Nevertheless, income taxes are the most critical factor (aside from diversification) to keep in mind when making retirement decisions. Furthermore, the very decision to save in a retirement account is a tax arbitrage. You are choosing to defer income taxes for a later date, as well as avoiding capital gains taxes. So, it’s important to maximize every dollar of savings. Contact…
A frequently overlooked and misunderstood retirement tax saving strategy is the use of a lump-sum distribution involving a distribution of employer-stock with Net Unrealized Appreciation (NUA). NUA is not widely known or understood because the IRS has published very little about it outside of its Treasury Regulations. Contact…
It works for employees who hold appreciated company stock in their 401k’s. To qualify, the employee needs to take a lump-sum distribution. Additionally, take the lump-sum distribution within 1-year from the date in which you have a “triggering event.” A triggering event is the date of retirement, disability, or separation. The trustee of your retirement account will distribute the NUA company stock into a separate taxable account. Federal income tax and early withdrawal penalties owed on the stock’s adjusted basis. The tax on the NUA is deferred and the employee can elect to include the NUA in income. Contact…
In conclusion, be aware: the NUA is not for everyone. Importantly, there are many pitfalls and traps for the unwary, such as improperly making the distribution. Thus, it is important to contact a tax specialist to guide you through the process. An analysis should be conducted to determine the tax ramifications, and the potential savings, for each unique situation. Contact…
With a little bit of planning, you could have a lot more money to spend in your retirement. Finally, we are available nationwide to handle your matter. Meet Charles.
The Internal Revenue Service announced today its 2018 annual tax inflation adjustments. The tax year 2018 adjustments generally are used on tax returns filed for the tax year 2018 and due beginning in 2019.
The standard deduction for married filing jointly rises to $13,000 for tax year 2018, up $300 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,500 in 2018, up from $6,350 in 2017, and for heads of households, the standard deduction will be $9,550 for tax year 2018, up from $9,350 for tax year 2017.
The personal exemption for tax year 2018 rises to $4,150, an increase of $100. The exemption is subject to a phase-out that begins with adjusted gross incomes of $266,700 ($320,000 for married couples filing jointly). It phases out completely at $389,200 ($442,500 for married couples filing jointly.)
For tax year 2018, the 39.6 percent tax rate affects single taxpayers whose income exceeds $426,700 ($480,050 for married taxpayers filing jointly), up from $418,400 and $470,700, respectively.
The limitation for itemized deductions claimed on tax year 2018 returns of individuals begins with incomes of $266,700 or more ($320,000 for married couples filing jointly).
The Alternative Minimum Tax exemption amount for tax year 2018 is $55,400 and begins to phase out at $123,100 ($86,200, for married couples filing jointly for whom the exemption begins to phase out at $164,100). The 2017 exemption amount was $54,300 ($84,500 for married couples filing jointly). For tax year 2018, the 28 percent tax rate applies to taxpayers with taxable incomes above $191,500 ($95,750 for married individuals filing separately).
The tax year 2018 maximum Earned Income Credit amount is $6,444 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,318 for tax year 2017.
In 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking,
For calendar year 2018, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage remains as it was for 2017: $695.
Participants who have self-only coverage in a Medical Savings Account, must have an annual deductible that is no less than $2,300, an increase of $50 from tax year 2017, but not more than $3,450, which is an increase of $100 from tax year 2017. For self-only coverage, the maximum out-of-pocket expense amount is $4,600, up $100 from 2017. Participants with family coverage, the floor for the annual deductible is $4,600, up from $4,500 in 2017, however, the deductible cannot be more than $6,850, up $100 from the limit for tax year 2017. For family coverage, the out-of-pocket expense limit is $8,400 for tax year 2018, an increase of $150 from tax year 2017.
The adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $114,000, up from $112,000 for tax year 2017.
The foreign earned income exclusion for 2018 is $104,100, up from $102,100 for tax year 2017.
Estates of decedents who die during 2018 have a basic exclusion amount of $5,600,000, up from a total of $5,490,000 for estates of decedents who died in 2017.
The annual exclusion for gifts increased to $15,000, an increase of $1,000 from the exclusion for tax year 2017.
Foreign Earned Income Exclusion.
In general, a U.S. citizen or a resident alien of the United States living abroad is taxed on their worldwide income. However, these taxpayers may qualify to exclude from income up to an amount of foreign earnings that is adjusted annually for inflation ($100,800 for 2015 or $101,300 for 2016). In addition, eligible taxpayers can exclude or deduct certain foreign housing amounts.
Offer in Compromise (OIC).
Should you consider an Offer in Compromise?
An Offer in Compromise allows you to settle your tax debt for less than the full amount you owe. It may be an option if you can’t pay your full tax liability. Also, the OIC may be an option if paying your full tax liability creates a financial hardship for you.
Due to the complexity of the OIC, we very strongly recommend you contact us prior to attempting an OIC.
OIC Acceptance Rate.
The IRS accepts less than half of the Offers in Compromise it receives. Before the IRS can consider an offer, you must be current with all filing requirements. Your tax returns must be filed for the prior six years.
Generally, if it appears to the IRS that you can pay your balance in full within 6 years, then the IRS may reject your OIC. Notably, the IRS uses a complicated methodology to analyze your financial situation.
In our experience, IRS agents make errors when conducting the financial analysis as well. In our view, many taxpayers incorrectly calculate their monthly income. Furthermore, we believe that many taxpayers incorrectly calculate their monthly expenses.
For example, if you are paid bi-weekly, you should multiply your check amount by 2.17 to determine your monthly income. Additionally, if you are calculating your monthly expenses, you may be required to apportion your expenses if you are married, even if your spouse is not liable. You do this by computing a pro rata percentage based upon your contribution to total household income. Then, you take your pro rata expense deductions based upon the allowable amount for the entire household.
The IRS has an Offer in Compromise Pre-Qualifier tool at IRS.gov. In our view, and based upon the mistakes we’ve seen, the offer in compromise tool is very difficult to use.
If your OIC is not accepted, then you have the right to appeal in certain cases.
If you need any help with an OIC please contact us.