Did You Know…?

by Mae Gerhart, CPA – Tax Accountant / Financial Planning Professional
When 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 less.

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 tax-free
  • 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 401(k)!

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 strategies available.

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 (cnbc.com)

Did You Know…?

You can access the latest from our VNFA video collection online at valleynationalgroup.com/video.

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If you know someone who might find the insights valuable, please feel free to share the links.

CALL TO ACTION: Reply to this e-mail with topics or questions that you would like to see our PROS address!

Did You Know…?

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.

Did You Know…?

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.

Did You 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

Did You Know…?

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.

Did You Know…?

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 tax@valleynationalgroup.com 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 tax@valleynationalgroup.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.

Did You Know..? TAX TIPS

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

Did You Know…?

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.