Do not feel overwhelmed if you owe back taxes to the Internal Revenue Service or a state taxing authority. The $300 billion plus federal tax gap is evidence that millions of people are experiencing tax problems. Do not expect tax problems to go away anytime soon. In 2009 our nation finds itself in the biggest economic crisis in modern history. Financial institutions are failing in record numbers. A credit crunch continues to loom, and the housing market continues to struggle amid global financial concerns. It is only natural that the tax gap will continue to increase as million of taxpayers …Read More
Are you still a little baffled about how the financial system came to be in such a mess? Here’s a very nice visualization of what happened.
By now everyone probably knows that the housing crisis has something to do with the fact that the economy has tanked, but the connection is still a bit vague if you’re not really into financial stuff. There have been several times in the last few months when I’ve thought about trying to write a simple explanation of how low interest rates, risky mortgages, CDOs, and abysmal judgment (among other things) helped bring us into …Read More
The stretch IRA, when implemented properly, can be one of the great vehicles for transferring wealth to your heirs, maintaining the tax-deferred status until much later. The problem is that there are some very specific terms that must be met in order to achieve the stretch – and if you screw it up, there’s definitely not a do over in most of these cases.
First, let’s run through the specifics that make up a stretch IRA situation. When an IRA account owner dies, the beneficiary(s) are eligible to re-title the account(s) as inherited IRAs in the name of …Read More
An exception to the 10% penalty on distributions from a qualified plan (but not an IRA) is when the distribution is pursuant to the imposition of a Qualified Domestic Relations Order, or QDRO (cue-DRO).
A QDRO is often put into place as part of a divorce settlement, especially when one spouse has a considerably larger retirement plan balance than the other. What happens in this case is that the court determines what amount (usually a percentage, although it could be a specific dollar amount) of retirement plan’s balance is to be presented to the non-owning spouse. Once that amount is …Read More
How does a QDRO (Qualified Domestic Relation Orders) impacts an established Series of Substantially Equal Periodic Payments (SOSEPP) – which, as we know, once established can only be changed one time?
Although not definitive, below are summaries of three Private Letter Rulings (PLRs) that seem to suggest first of all that making the distribution is not subject to the 10% penalty when a QDRO or divorce decree is involved, pursuant to the regulation in Code section 72(t)(4)(A)(ii)..
1) The transfer to a taxpayer’s spouse pursuant to a divorce decree of 50% of each of three separate IRAs owned by …Read More