Mae Gerhart, CPA – Tax Accountant / Financial Planning Professional
you leave a job, you can often leave your 401(k) in your prior employer’s plan.
Some 401(k) plans require immediate distributions if the balance is $5,000 or
If you receive a
distribution check from your 401(k) there may be significant tax consequences,
such as including it in income and an additional 10% early withdrawal penalty!
One way to avoid this penalty is to perform a direct IRA rollover which
transfers the money directly from your 401(k) to an IRA.
Some benefits of a self-directed IRA rollover include:
- Such a transfer can be accomplished
- You can increase the investment
flexibility and choices in your Rollover IRA
- A rollover IRA gives you the most
distribution features and flexibility in retirement
Distributions from IRAs
may qualify for an exception to a 10% early withdrawal penalty before age 59 ½
if used for a first-time home purchase ($10,000 lifetime maximum), qualified
higher education expenses for yourself, your spouse, child, or grandchild, or
for health insurance premiums for certain unemployed individuals. But it’s all
in the name–these exceptions do not work if the money was pulled out of a
It doesn’t always make
sense to rollover your 401(k) to an IRA. For example, if you are separating
from service in or after the year you reach 55 (50 for qualified public safety
employees) or if you hold employer stock in your 401(k), there might be other
Please reach out to your financial advisor to help you
determine the best course of action for your 401(k) at an old employer.
RELATED ARTICLE: Switching
jobs? Don’t make these mistakes with your retirement plan
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by Frank Stettner, CPA, CFP ®, Senior Vice President
New Jersey allows seniors who are 62 or older to exclude all or part of their pension income, plus other income, from their state income tax return. This exclusion is going up between 2017 and 2020 as long as your gross income – not taxable income – is not more than $100,000. The exclusion was $40,000 in 2017, $60,000 in 2018 and is $80,000 in 2019. In 2020, it reaches $100,000. If your gross income is one dollar more than $100,000, you get zero pension exclusion. It is not phased out – it is simply gone .The instructions for calculating the “Pension Exclusion and Other Retirement Income Exclusion” state that the $100,000 limit is based on line 26, Total Income.
So what income is not included on line 26?
There are three types of income that don’t show up: Social Security
benefits, New Jersey municipal bond interest and federal government bond
interest. Everything else is included as income on your New Jersey tax return.
If you are close to the $100,000 threshold,
is there any way you can reduce your gross income to come in below the
allowable amount? If you have interest income, consider putting some money in
New Jersey municipal bonds. If you have dividend income, consider moving some
money into non dividend paying stocks or mutual funds. Evaluate this with your
advisor to see if it makes sense for you.
Was your 2018 tax refund not
as large as you were originally anticipating, or did you end up owing? With the changes
from the 2016 Tax Cuts and Jobs Act, the IRS is still trying to perfect the
Form W-4 for the proper amount of tax withholding.
If you are expecting
any life changes this year — marital status, number of dependents, or a
substantial change in income or deductions — contact us so we can help you
avoid the surprise next year.
READ MORE: The IRS releases its new tax withholding form. Here’s what you need to know.
Lehigh Valley Business had invited our
Founder & Chairman, Thomas Riddle, to participate in a panel discussion
about Succession Planning at their Business Growth Symposium the morning of
June 13 at DeSales University. Tom will share his planning approach and
experience with the panel and audience.
For more information and registration, visit lvb.com/event/business-growth-symposium
Special Event Alert
Our Senior Vice President Laurie Siebert is co-hosting a free Estate Planning seminar at PBS39 (839 Sesame Street, Bethlehem) on Wednesday, May 8 at 10 a.m.
Laurie and Attorney Charles Stopp,
principal at the Law Offices of Steckel and Stopp will cover a variety of
topics and addresses common questions.
Registration is free, and seats can
be reserved online at the PBS30 website or by contacting
Mariella Miller at 610-984-8222.
Final Tax Return Reminders!
Monday is the filing deadline, and our team is busy making sure that our clients’ tax returns are completed.
If you have requested a paper copy of your
return, our office will notify you when it is ready for pickup. If you
requested a digital copy, you will receive a notification e-mail from firstname.lastname@example.org
to let you know that your returns are ready for review and your signatures.
Please be sure to return your signed 8879
and state filing forms to us as quickly as possible. You can deliver them in
person, post a scan or image of the signed paper document to your eVault Client
Portal, or e-mail them to our team at email@example.com.
Remember, local tax returns and any related
payments are your responsibility to submit directly. We include instructions in
your personal tax packet to help you get these submitted.
The IRS publishes a special electronic guide with tips for taxpayers
during filing season. There have been three additional updates in 2019
covering tax reform changes, “Where’s My Refund?” and an RMD reminder. READ MORE at IRS.gov
Are you charitably inclined, not able to itemize but close to age 70 ½?
A couple options: 1. Consider postponing charitable giving until you reach age 70 ½ and can make charitable donations directly from your IRA; 2. Calculate the amount of your annual charitable giving times the number of years until age 70 ½ and see if it makes sense to “bunch” your charitable giving into one tax year using a donor advised fund.
Do you hate making estimated tax payments on that unearned income?
If you really don’t like having to remember to make quarterly estimated tax payments and have income available for federal income tax withholdings such as wages, pensions or IRAs, consider adjusting your withholding to cover any balances due. You can request additional amounts to be withheld from wages or up the percentage withheld on other sources such as IRAs or Social Security.
IRMAA – Income related monthly adjustment amount on your Medicare premiums.
Do a little tax planning to help manage the premium adjustments on your Medicare because of high income thresholds. If you have had a substantial change or life event in your income circumstances, you may qualify for an adjustment. Click here for the Medicare Income-Related Monthly Adjustment Amount – Life Changing Event Form SSA-44.
For more tax tips and related
resources, visit our website at valleynationalgroup.com/tax
by Laurie Siebert, CPA, CFP®, AEP®, Senior Vice President
I attended the Estate Planning Council of the Lehigh Valley’s recent “Estate Planning in a World of Rapidly Advancing Technology” seminar. What I learned is that you cannot ignore the implications of technology in the way we hold, access, retain, share and use it for financial or personal transactions and storage. Assuming that your personal representatives will have the ability to manage your internet of “things” may be costly. In any number of ways, accounts that may be accessible by user identification and passwords, may no longer be accessible if the account is closed. This could happen when credit cards linked to the accounts are notified of the death and they become frozen. Work with your attorney to make sure that your personal representatives will have the required permissions or strategies to manage your digital world. Leave a roadmap of your online footprint for your personal representatives as well. We strongly encourage everyone to take an inventory of the way you use technology, how to access it, what information or monetary value may be buried and on what devices.