Don’t Underestimate the Value of a CPA

Over the last several years, many taxpayers have been going the do-it-yourself route when it comes to

tax preparation. While that may be a great option for many people, if you have an IRA or other retirement assets, you may want to consider sticking to your trusty CPA who can provide accounting services beyond the do-it-yourself computer programs. In Tax Court case, Bernard v. C.I.R. (T.C. 2012) 104 T.C.M. (CCH) 136, a married couple failed to correctly report their IRA distributions on their tax return. They used a popular tax preparation software program but, unfortunately, such programs cannot always determine whether or not the user is properly inputting data.

2014 American Graphic Design Awards!

We are pleased to announce that we have been selected as a winner in the 2014 American Graphic Design Awards! More than 8,000 entries were submitted and Table Bay’s corporate brochure ranked in the top 15%, earning a Certificate of Excellence!

Social Security: When Should You Apply?

The truth is, there is no catchall “best” age to apply for Social Security benefits because your “optimal time” will vary based on your individual circumstances. Even though there is no one size fits all answer to this question, some factors every Baby Boomer should consider are:

• Individual health status

• Life expectancy based on that health status

• Estimated need for income during your retirement

• Whether you plan (or expect you’ll need ) to work during your retirement years

• Whether or not there are (or you anticipate) any survivor needs

The most obvious perk of delaying your benefit is that you will have an opportunity to collect more money. If you apply early, your benefit not only starts lower but it will stay lower for the rest of your life, it does not increase when you turn 66. Remember, COLAs will increase your benefit and the longer you expect to live, the more beneficial it is for you to delay your Social Security benefits. Also keep in mind that your decision will impact survivor benefits so it is an important consideration in planning your strategy, as a delay will increase survivor benefits as well. According to the Social Security Administration, the chart below illustrates an example of how delaying your Social Security may impact the amount of benefits you ultimately receive. This chart is intended for illustration purposes only and assumes a benefit of $1,000 at a full retirement age of 66:

Bankruptcy and IRAs

The federal bankruptcy exemption for IRAs was originally set at $1 million through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Every three years, that amount is adjusted for consumer price index changes. The federal IRA bankruptcy exemption limit is currently just over $1.2 million.

IRAs created under an employer sponsored section 408(k) simplified employee pension (a “SEP IRA”) or a section 408(p) simple retirement account (a “SIMPLE IRA”), as well as pension, profit-sharing, or section 401(k) wealth transferred to a rollover IRA, enjoy an unlimited exemption from the bankruptcy estate.

Latest 60-Day Rollover Private Letter Ruling

If you have an IRA and choose to do a rollover, you have 60 days to complete the transaction. Occasionally, for one reason or another, IRA owners miss the 60-day rollover deadline, rendering the failed rollover a fully taxable distribution. However, under certain circumstances, the IRA owner may be granted a waiver by the IRS. Recently, a Private Letter Ruling (PLR) was issued to an IRA

The Importance of Beneficiary Reviews

Simple mistakes can cost your beneficiaries everything. Beneficiary designation forms are often overlooked when people are reviewing their estate plans. This simple oversight, however, can have dire consequences. For example, divorce is already an unpleasant event but imagine that your ex-spouse gets the proceeds of your life insurance policy plan assets and/or retirement accounts because you forgot to update your beneficiary designation forms.

Section 1035 Exchanges

Does your current insurance policy need to be updated to reflect changes in your personal situation and financial planning goals? Insurance needs change as your family, financial, and business needs change. Just as technology created new means of communication and streamlined old methods, new types of insurance programs sold by ethical

agents will match the most current features and updates to your changing needs. If a new product provides a more cost effective solution than your old product, then you may consider exchanging the old policy for a new one.

Federal income tax law facilitates certain exchanges by providing that in some instances they may be made without the immediate recognition of gain. Although such transactions are sometimes referred to as “Section 1035 tax-free exchanges” the gain at the time of the transaction is not forgiven but is deferred rather than recognized as an immediate taxable event. If you decide that a 1035 exchange is a right strategy for you, be careful - you don’t want to trigger unwanted consequences so make sure that you understand all of the rules before you engage in such a transaction. An insurance licensed advisor, retirement distribution specialist or tax professional can help you determine whether a Section 1035 exchange may be appropriate for you.