Tag Archives: rinaldi dustin

05.21.18
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Dustin Rinaldi on tax changes: 529 plans

Thanks to the Tax Cuts and Jobs Act of 2017, Section 529 plan savings may now be used for K-12 tuition as well as for higher education costs.

Over 20 years ago, federal lawmakers authorized states to create tax-exempt “qualified tuition programs” — Section 529 plans — to help taxpayers fund the cost of higher education. The Tax Cuts and Jobs Act of 2017 expands Section 529 by allowing tax-free account withdrawals not only for qualified higher education expenses but also for tuition at public, private, or religious elementary and secondary schools.

Tax-free 529 withdrawals for K-12 are capped at $10,000 a year, per student

If a child is the beneficiary of multiple 529 plan accounts, the $10,000 may be distributed from one or more of the accounts. Withdrawals in excess of $10,000 would be taxed according to the Section 529 rules (generally as part nontaxable return of principal and part distribution of earnings subject to both income taxes and a 10% penalty).

529 plans typically have generous contribution limits

Since most states’ 529 plans have relatively high limits on contributions, using one or more 529 plans to save for both K-12 tuition and higher education expenses may be a practical option for families who expect to incur those costs. Although 529 plan contributions are not deductible for federal income tax purposes, many states provide residents a state tax deduction for contributions to their plans.

Contributions to Coverdell education savings accounts, which also allow tax-free withdrawals for qualified K-12 and college expenses, are restricted to $2,000 a year (per beneficiary) and are phased out for higher-income taxpayers. There are no such limits on 529 plan contributions. Both types of accounts allow any investment earnings to build up deferred of federal income taxes.

Rollovers to ABLE accounts are permitted

Federal tax law allows 529 plan savings for a beneficiary to be rolled over tax-free within 60 days of distribution to another 529 account for the same beneficiary. Tax-free rollovers of 529 plan funds are also permitted from one beneficiary to another beneficiary who is a member of the same family (e.g., a sibling or other relative defined in the law). This flexibility can be useful in the event the original 529 account beneficiary doesn’t need the money for educational expenses or uses only a portion of the account balance.

The Tax Cuts and Jobs Act provides another rollover option by allowing 529 plan savings to be rolled over tax and penalty free (within limits) to an ABLE account owned by the designated beneficiary or a member of the beneficiary’s family. ABLE accounts are tax-advantaged accounts for disabled individuals. Unless it is extended or made permanent, the 529-to-ABLE account rollover provision will expire after 2025.

This is just an overview of the new 529 plan tax provisions. Please consult your tax advisor for more information about the rules and how they apply in your specific situation.

Footnotes/Disclaimers

This communication is not intended to be tax advice and should not be treated as such. You should contact your tax professional to discuss your specific situation.

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

04.18.18
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Dustin Rinaldi Shares Red Flags that Could Alert the IRS

The IRS audited approximately 1.4 million individual tax returns filed in 2012.1 That amounts to approximately 1% of 146 million individual returns filed that year. However, fewer than one-quarter of those audits involved face-to-face meetings with IRS auditors. The rest were conducted through the mail.

Filers earning less than $100,000 had a .58% chance of being audited. Among filers with income exceeding

$200,000, the audit rate was 2.06%; for those earning more than $1 million, it climbed to 9.20%. Audit risk also increased for self-employed taxpayers who filed a Schedule C, Income and Expenses for sole proprietors.

Depending on how much income was reported, the chance of being audited ranged from 1.0% for returns listing gross receipts under $25,000 to 2.7% for those reporting gross receipts of $200,000 or more.1

What Triggers an Audit

The following are some of the red flags that could alert the IRS, aside from earning a lot of money:

1. Running a cash business

2. Claiming the home-office deduction

3. Self-employment

4. Deducting business meals, travel, and entertainment

5. Failing to report all taxable income

6. Claiming 100% business use of a vehicle

7. Making large charitable contributions

8. Claiming a rental loss

9. Taking larger than usual deductions

What the IRS Looks For

Whether the IRS requests a face-to-face meeting or chooses to conduct its audit through correspondence, the following issues may arise:

· Unreported income — The IRS will assess taxes on any “missing” amount plus interest and penalty charges — regardless of whether the omission was accidental or intentional. A finding of significant fraud could even result in criminal prosecution and jail time.

· Personal expenses vs. business expenses — Be prepared to prove that expenses you’ve claimed for business purposes were not actually personal expenses. Auditors pay particular attention to deductions related to entertainment, meals, travel, and transportation. If you own a business, keep all receipts and be ready to answer questions about the connection between each expense and your business.

Even if you don’t expect the worst during your audit, there are several reasons it’s still a good idea to enlist the services of an experienced tax professional to help you navigate the process. For example, a professional is probably more familiar with the complexities of ever-changing tax laws than you, and is also less likely to let emotions cloud his or her judgment. In addition, letting a pro speak on your behalf reduces the chance that you will accidentally volunteer information that could hurt your case.

This communication is not intended to provide tax advice and should not be treated as such. Each individual’s tax situation is different. You should contact your tax professional to discuss your personal situation.

For more information or any questions regarding this topic, contact certified financial planner Dustin Rinaldi or call (239) 444-6111.

1Source: IRS, Internal Revenue Service Data Book, March 2014.

04.18.18
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Dustin Rinaldi’s Steps to Keep Retirement Income Flowing

After years of accumulating assets, the time will come for you to begin drawing on those assets to provide income throughout retirement. Before that day arrives, be sure to consider some steps to assist you in keeping your retirement income stream flowing.

Set a Sustainable Withdrawal Rate

As tax-advantaged retirement savings vehicles such as 401(k)s and IRAs have proliferated, so too has the trend toward self-funding of retirement. In the future, the share of personal assets required to fund retirement is sure to grow, which makes knowing how much you can withdraw from your investment accounts each year — and still maintain a healthy cushion against uncertain market and personal circumstances — a necessity to any retirement income plan.

A number of factors will influence your choice of withdrawal rates. These include your longevity, the potential impact of inflation on your assets, and the variability of investment returns. Therefore, when crafting a retirement asset allocation, a key question will be how much to allocate to stocks.1 Certainly you will want to maintain enough growth potential to protect against inflation, yet you will also need to be wary of being too exposed to stock market gyrations. Generally speaking, those who have planned well and amassed enough assets to comfortably finance retirement may be in a better position to include more stocks in their portfolios than those who enter retirement with less.

Developing a Withdrawal Rate

The goal of your withdrawal plan is to crack your nest egg in such a way as to provide a reliable stream of income for as long as you live. The question is, “How much can I plan to withdraw each year without depleting my financial resources?” Academic studies suggest a yearly withdrawal rate of 4% of your portfolio’s value based on an asset allocation of 60% stocks and 40% cash and fixed-income investments.2 By staying within this withdrawal range you potentially should be able to maintain your portfolio’s value in real, inflation-adjusted terms for an extended period of years, although past performance is no guarantee of future results.

Please contact us for additional help analyzing your specific situation. You should also revisit your personal withdrawal strategy each year, as your situation and tax laws may change.

For more information or any questions regarding this topic, contact certified financial planner Dustin Rinaldi or call (239) 444-6111.

1 Asset allocation does not assure a profit or protect against a loss. Investing in stocks involves risks, including loss of principal.

2 This example is hypothetical and not intended as investment advice. Your results will vary.