If you’re like many people, you’ve worked hard to accumulate a large nest egg in your traditional IRA (including a SEP-IRA). It’s even more critical to carefully plan for withdrawals from these retirement-savings vehicles.
Knowing the fine points of the IRA distribution rules can make a significant difference in how much you and your family will get to keep after taxes. Here are three IRA areas to understand:
Years ago, Congress enacted the “kiddie tax” rules to prevent parents and grandparents in high tax brackets from shifting income (especially from investments) to children in lower tax brackets. And while the tax caused some families pain in the past, it has gotten worse today. That’s because the Tax Cuts and Jobs Act (TCJA) made changes to the kiddie tax by revising the tax rate structure.
History of the Tax
The kiddie tax used to apply only to children under age 14 — which provided families with plenty of opportunity to enjoy significant tax savings from income shifting.
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You may have heard of the “nanny tax.” But even if you don’t employ a nanny, it may apply to you. Hiring a housekeeper, gardener or other household worker (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations.
If you employ a household worker, you aren’t required to withhold federal income taxes from pay.
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If you’re a volunteer who works for charity, you may be entitled to some tax breaks if you itemize deductions on your tax return. Unfortunately, they may not amount to as much as you think your generosity is worth.
Because donations to charity of cash or property generally are tax deductible for itemizers, it may seem like donations of something more valuable for many people — their time — would also be deductible. However, no tax deduction is allowed for the value of time you spend volunteering or the services you perform for a charitable organization.
It doesn’t matter if the services you provide require significant skills and experience, such as construction, which a charity would have to pay dearly for if it went out and obtained itself. You still don’t get to deduct the value of your time.
However, you potentially can deduct out-of-pocket costs associated with your volunteer work.
Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski and I’m back again with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to The Playbook.
Frank: Thanks, Jen. It’s great to be back.
Jen: We were talking about FDII last time and that there have been a
During your working days, you pay Social Security tax in the form of withholding from your salary or self-employment tax. And when you start receiving Social Security benefits, you may be surprised to learn that some of the payments may be taxed.
If you’re getting close to retirement age, you may be wondering if your benefits are going to be taxed. And if so, how much will you have to pay? The answer depends on your other income. If you are taxed, between 50% and 85% of your payments will be hit with federal income tax. (There could also be state tax.)
Important: This doesn’t mean you pay 50% to 85% of your benefits back to the government in taxes. It means that you have to include 50% to 85% of them in your income subject to your regular tax rates.
Now that most schools are out for the summer, you might be sending your children to day camp. It’s often a significant expense. The good news: You might be eligible for a tax break for the cost.
Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.
Contact your trusted advisor to ensure you’re meeting all applicable deadlines and to learn more about the filing
You’ve probably seen or heard ads urging you to donate your car to charity. “Make a difference and receive tax savings,” one organization states.
But donating a vehicle may not result in a big tax deduction — or any deduction at all.
Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to The Playbook.
Frank: Thanks. It’s exciting to be back.
Jen: I know there’s been some new changes to the Foreign-Derived Intangible Income, or FDII, as we’ve been calling it, that released in early March. What do we need to know about the new changes?
Frank: That’s right. Even though it’s interesting about this new tax law is that, even though it was passed a little over a year ago, guidance is still trickling in. Even though a law has been on the books, usually you do planning on a go-forward basis. There is some planning to go back and see about opportunities you may not have had.