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Professional accounting and tax services

G.A. Clahar, CPA, provides accounting services for small and mid-sized companies on Long Island and in the New York metro area. We also provide tax services to individuals nationwide. We are committed to each and every client and invite you to learn more about our high-quality, personalized, reasonably priced services.

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Using IRA's to the Max!

Geraldine Clahar - Thursday, November 09, 2017

 

Are you using IRA’s to the MAX?

 

Saving towards retirement can be difficult considering our expenses and the lack of salary increments over the years.The world economy generally is improving, but not enough to make the economic factors of the past ones that we can depend on to secure our futures in retirement.Times have changed and we must too!Gone are the days when we would find a good paying job with excellent benefits, hold on to that job until we retire and we would be set for life.Today, job security is none-existent; excellent benefits are few and far between; being set for life is your own responsibility.

Have you heard the mantra, “Pay yourself first”?It is a great principle to adopt if you are to be successful in taking responsibility for your financial future.Here are 5 ways to use IRA’s (Traditional, ROTH) to help you take responsibility:

 

  • 1.  Invest in an IRA if you are employed and your employer does not have a retirement plan
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A Traditional or ROTH IRA is a good investment vehicle.Decide which option to choose based on whether the immediate or future tax benefit is more critical for your situation.You can invest in one or the other or a combination of the two as long as you do not exceed the maximum contribution allowable for your age.Under 50 years old the cap is $5500.Age 50 or older the cap is $6500. The cap is expected to increase in future years so check trusted sources for changes.

 

  • 2.  Invest in an IRA if your employer does have a retirement plan, but the employer’s dollar for dollar matching contribution is less than your IRA  maximum contribution for the year
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If you are covered by an employer’s retirement plan, you MAY still be able to invest in an IRA.If you have invested $5500 or more ($6500 if you are 50 years old or older) in your pension plan, then you cannot invest in an IRA. You can combine contributions into your pension plan and IRA as long as the contribution cap for each is respected.

 

  • 3. You are self-employed – a SEP-IRA is a good option
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Small business owners many times find themselves in the position where they are so focused on the business and its employees, that they neglect their own financial situation. The “Pay yourself first” mantra applies here as well.With a SEP-IRA or 401(k) the small business owner can make a significant contribution towards retirement with very little, if any, reporting necessary. You can invest up to 25% of your net business income into a SEP with a cap of $ 54,000 for 2017.

 

  • 4. You are self-employed, your spouse is your employee or full-time homemaker – the spouse can invest in an IRA

 

In general, for one to be able to contribute to an IRA the individual must have earned income.An exception exists for a full-time homemaker whose spouse has earned income.The regulation allows such a homemaker to contribute up to the maximum into an IRA.This is a great loophole to get additional income set aside for retirement.

 

  • 5.You are a business owner and your minor child is your employee, the child can invest in an IRA

 

Many small business owners have their minor children doing odd jobs for them.Take the next step and pay that child.Contribute the eligible amount into an IRA in the child’s name.That’s savings for college, retirement or both. 

 

This article is not all-inclusive. For more information talk with a financial advisor or tax professional. You may also do your own research online.IRS Pub 590 is an excellent resource. Review some of our other blog posts for more helpful information.

 


Introduction to estate planning

Geraldine Clahar - Monday, July 24, 2017

 

 

What is an estate?

 

An estate is the accumulation of everything that one owns – real and personal property.Some estates are small others are large.The following are assets that are part of your estate:

(a)Home(s) and contents

(b)Art collections

(c)Coin collections

(d)Automobiles

(e)Jewelry

(f)Investment property – rental property

(g)Life insurance proceeds

(h)Pension plans

(i)IRA’s

(j)Bank accounts

(k)Investment accounts

(l)Investment value of a business

(m)Revocable trusts

(n)Inheritance

 

Who has an Estate?

 

 

The first time one owns something, the estate is created and grows until death.So, the estate could be created at birth assuming the child is given gift of money or other assets.In effect, everyone has an estate.Hence everyone should be concerned about what happens to that estate in the event of death.

 

How long does the estate exist?

 

The estate is created the first time one acquires an asset.Since a dead person cannot have an estate, at death the estate of the deceased must be distributed to others and once the distribution is complete the estate dies.

 

How is the estate disposed of?

 

The old adage goes “You can’t take it with you.”Everything you own at death has to be transferred to someone or something else within a short time of death.You might not have an estate tax issue, but there will be an issue of transfer of ownership of assets.How the asset is transferred can impact the tax base of the recipient, so serious consideration should be made when transferring assets from one individual to another.

 

There are several ways that the assets of a deceased can be passed or distributed to others:

(a)Will or trust

(b)Title

(c)Probate proceedings

(d)Operation of Law

 

These assets can be given away during that person’s life time (gifts) or at death (bequests). Maximum that can be gifted to any individual each is currently  $14,000 per year.

 

Spousal Exemption and Portability:

 

Each person is allowed to accumulate a certain amount of assets free of estate tax: exemption - $5,459,000 (federal) and $5,250,000 (NYS).The asset value in excess of the exemption amount is subject to estate tax – 40% federal tax rate. The exemption that one spouse does not use can be ported over (transferred) to the surviving spouse.This is added to the surviving spouse’s exemption amount allowing a greater exemption upon that spouse’s death.This is at the federal level only.Portability is not available in New York State.


 

Portability is an election! To make the election a Form 706 must be timely filed – No later than 9 months after date of death.This is a very exact calculation!That is, start counting from the date of death, not the month of death!!

 

 

 3 Reasons to file Form 706 even if no tax is due:

 

 

1.To make the portability election

2.To notify the IRS of valuations made to appreciable assets that have been passed on

3.To establish the fair market values of assets at the date of death

 


 

 

 

 

 

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G.A. Clahar, CPA  ·  1188 Village Ave., Baldwin, New York 11510  ·  Phone: (516) 483-3851