Archive for Tax Planning

IRA Mistakes on RMD- #3

What happens when a person gets RMD aggregation wrong?
There are two potential penalties when people make RMD aggregation mistakes: the penalty for excess contributions and the penalty for missed RMDs.

RMDs that are rolled over to another retirement plan create an excess contribution in the receiving account, which must be corrected as soon as possible.
When an excess contribution is corrected by October 15 of the year after the year for which the contribution was made, the amount of the excess plus or minus the gains or losses attributable to the amount of excess contribution must be removed from the account as well.
Excess contributions that are not corrected are subject to a penalty of 6% per year for every year they remain in the account. Form 5329 should be filed with the IRA owner’s tax return to report the excess contribution and to calculate the 6%.

When a distribution is taken from the wrong type of account, you have a missed RMD. For example, suppose a person accidentally takes the 403(b) RMD from his IRA. This is against the rules. The person has a missed RMD in the 403(b). The penalty for a missed RMD is a steep one- it is 50% of the amount not taken.

Most people use qualified plans like 401k,403(b) and IRAs to save for retirement, but, the tax traps are so heavy that I do not recommend using them. I share with my clients much better accumulation strategies that provide tax FREE income for life and are not a tax trap like these other vehicles.

2018 Tax Alert : Rental Real Estate by Paul Ferraresi

The newly implemented Tax Law for 2018 through 2026 has some marvelous benefits for individuals. True , what the Government “Giveth” the Government “Taketh” away.
Namely, with any new tax savings in an area one pays taxes in another area.

For most Americans the “SALT” (State, local, sales and property tax deduction)limitation of $10,000 will be hurtful .

Be Aware!!!! If you own rental property and report it on Schedule E, there are new limitations. If you have Schedule E losses , then, those losses begin to Phase Out at incomes of $100,000. The losses are completely Phased Out at $150,000 of income. See your tax advisor( not Turbo Tax) on how to restructure ownership of these properties to keep your liability protection in place while allowing these passive losses.

An exception to this rule applies to Real Estate Professionals and Developers.

TAX TORPEDO by Paul Ferraresi

Will your income during retirement be above $25,000 for singles and $32,000 for married filing jointly?

If so you will be hit with the Social Security Tax Torpedo Tax.

Read how it will increase your taxes.


Only one 60 day IRA- to- IRA rollover can be done per year by an individual, regardless of how many IRAs he or she holds.

In the past, the IRS believed the rule applied separately to each IRA, but that is no longer the case. The new IRS publications make it clear that the rule now applies in the aggregate to all IRAs.

The once per year IRA rollover rule also does not apply to rollovers from other types of plans to IRAs, to rollovers from IRAs back to plans or to Roth conversions.

Further, the rule does not apply to non-spouse IRA beneficiaries, because they can never do a 60 day rollover anyway. Non-spouse IRA beneficiaries can move inherited IRA funds only using direct transfers. A spouse can do a rollover, but after a spouse’s death, spousal rollovers should also be done as direct transfers.


A 60 day rollover means that the funds were withdrawn by the IRA owner via a check made out to the owner personally. By contrast, a direct transfer involves a trustee-to-trustee movement, in which the money moves directly from one IRA to another without anyone touching the money in between.

IRS Announcement 2014-32 makes it clear that a check made out to the receiving IRA will qualify as direct transfer and is not subject to the once-per-years IRA rollover rule. But a check made out to the IRA owner will not qualify for this exception because he or she can cash this check.

The rule now states that only one IRA-to-IRA rollover can be done per year from all IRAs held by an individual including SEPs, Simple IRAs and Roth IRAs. Note that one year means 365 days, not a calendar year.

If one does make another transfer, that will be an ineligible rollover and taxable to the extent of pretax funds withdrawn.

The transfer will also be subject to 10% early distribution penalty if one is under age 59 ½, and no exception to the 10% penalty applies here.

The action could also be subject to a 6% excess IRA contribution penalty if the ineligible rollover is not removed in a timely manner.

All of these IRA problems can be avoided by using only direct transfers. Direct transfers are not subject to this rule. An unlimited number of direct IRA transfers can be done.

IRA TROUBLE by Paul Ferraresi

What you think should happen to an IRA distribution and the actual outcome is two different things.

This great article (see link below) from the April 17, 2017 issue of shows the tax horror stories that can develop.

The Lesson: Get competent advice from your advisor before doing anything with your IRA.

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