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Other Articles

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- Married Filers, The Choice Is Yours

- Reacquainting Yourself With The Roth IRA

- How You Can Help Prevent Tax-Related Identity Theft

 

- Consolidate Accounts And Simplify Your Financial Life

 

- Time to Start Year-End Tax Planning

- Shared Equity Financing Arrangements For Home Ownership
 

- Planning To Avoid Or Minimize The 3.8% Net Investment Income Tax

- Supreme Court Legalizes same-gender Marriages In All States

- The Importance of Updating Beneficiary Designations

- Now is a Good Time to Start Planning and Organizing Your Taxes

- The Many Benefits of a Health Savings Account (HSA)

- Combined Business And Vacation Travel

- What You Should Do With An Identity Verification Letter From The Irs

- Donating A Life Insurance Policy To Charity

- Taxation Of College Financial Aid

 


 

 

Reacquainting Yourself With The Roth IRA - Married Filers, The Choice Is Yours - Scam Calls Are Using IRS as Bait



Reacquainting Yourself With The Roth IRA

If you've looked into retirement planning, you've probably heard about the Roth IRA.

Maybe in the past you decided against one of these arrangements, or perhaps you just decided to sleep on it. Whatever the case may be, now's a good time to reacquaint yourself with the Roth IRA and its potential benefits, because you have until April 18, 2016, to make a 2015 Roth IRA contribution.
 

Free Withdrawals

With a Roth IRA, you give up the deductibility of contributions for the freedom to make tax-free qualified withdrawals. This differs from a traditional IRA, where contributions may be deductible and earnings grow on a tax-deferred basis, but withdrawals (less any prorated nondeductible contributions) are subject to ordinary income taxes — plus a 10% penalty if you're under age 59½ at the time of the distribution.

With a Roth IRA, you can withdraw your contributions tax-free and penalty-free anytime. Withdrawals of account earnings (considered made only after all your contributions are withdrawn) are tax-free if you make them after you've had the Roth IRA for five years and you're age 59 1/2 or older. Earnings withdrawn before this time are subject to ordinary income taxes, as well as a 10% penalty (with certain exceptions) if withdrawn before you are age 59 1/2.

On the plus side, you can leave funds in your Roth IRA as long as you want. This differs from the required minimum distributions starting after age 70 1/2 for traditional IRAs.

Limited Contributions

For 2016, the annual Roth IRA contribution limit is $5,500 ($6,500 for taxpayers age 50 or older), reduced by any contributions made to traditional IRAs. Your modified adjusted gross income (MAGI) may also affect your ability to contribute, however.

In 2016, the contribution limit phases out for married couples filing jointly with MAGIs between $184,000 and $194,000. The 2016 phaseout range for single and head-of-household filers is $117,000 to $132,000.

Conversion Question

Regardless of MAGI, anyone may convert a traditional IRA into a Roth to turn future tax-deferred potential growth into tax-free potential growth. From an income tax perspective, whether a conversion makes sense depends on whether you're better off paying tax now or later.

When you do a Roth conversion, you have to pay taxes on the amount you convert. So if you expect your tax rate to be higher in retirement than it is now, converting to a Roth may be advantageous - provided you can afford to pay the tax using funds from outside an IRA. If you expect your tax rate to be lower in retirement, however, it may make more sense to leave your savings in a traditional IRA or employer-sponsored plan.

Retirement Radar

Roth IRAs have become a fundamental part of retirement planning. Even if you're not ready for one just yet, be sure to keep the idea of opening one on your radar.
 



Married Filers, The Choice Is Yours

Some married couples assume they have to file their tax returns jointly. Others may know they have a choice but not want to rock the boat by filing separately.

 

The truth is that there's no harm in at least considering your options every year.

Granted, married taxpayers who file jointly can take advantage of certain credits not available to separate filers. They're also more likely to be able to make deductible IRA contributions and less likely to be subject to the alternative minimum tax.

But there are circumstances under which filing separately may be a good idea. For example, filing separately can save tax when one spouse's income is much higher than the others, and the spouse with lower income has miscellaneous itemized deductions exceeding 2% of his or her adjusted gross income (AGI) or medical expenses exceeding 10% of his or her AGI - but jointly the couple's expenses wouldn't exceed the applicable floor for their joint AGI. However, in community property states, income and expenses generally must be split equally unless they're attributable to separate funds.

Many factors play into the joint vs. separate filing decision. If you're interested in learning more, please give us a call.
 


Scam Calls & Emails Using IRS as Bait Still Persist

Scams using the IRS as a lure continue. They take many different forms.

The most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too.

Be wary if you get an out-of-the-blue phone call or automated message from someone who claims to be from the IRS. Sometimes they say you owe money and must pay right away. Other times they say you are owed a refund and ask for your bank account information over the phone. Don't fall for it.

 

Here are several tips that will help you avoid becoming a scam victim.


The real IRS will NOT:

- Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
- Demand tax payment and not allow you to question or appeal the amount you owe.
- Require that you pay your taxes a certain way. For example, demand that you pay with a prepaid debit card.
- Ask for your credit or debit card numbers over the phone.
- Threaten to bring in local police or other agencies to arrest you without paying.
- Threaten you with a lawsuit.

If you don't owe taxes or have no reason to think that you do:

- Contact the Treasury Inspector General for Tax Administration. Use TIGTA's "IRS Impersonation Scam Reporting" web page to report the incident.
- You should also report it to the Federal Trade Commission. Use the "FTC Complaint Assistant" on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.

If you think you may owe taxes:

- Ask for a call back number and an employee badge number.
- Call the IRS at 800-829-1040. IRS employees can help you.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real. The scammers' goal is to lure victims to give up their personal and financial information. If they get what they're after, they use it to steal a victim's money and their identity.

If you get a ‘phishing' email, the IRS offers this advice:

- Don't reply to the message.
- Don't give out your personal or financial information.
- Forward the email to phishing@irs.gov. Then delete it.
- Don't open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
 

Remember you can call our offices if you have any questions about these or any other accounting, tax, financial planning or insurance related issues, at 313-388-0300 or our other area offices listed below.

 

Regards, Philip Schreiber, CPA

Schreiber Advisors, PC

 

Philip Schreiber, CPA | Schreiber Advisors, PC | Certified Public Accountants
phil@cpatechs.com
Allen Park Office: 14801 Southfield Road | Allen Park, MI 48101
313-388-0300
| Fax 313-388-0303

Farmington Hills Office: 30201 Orchard Lake Rd., Ste 115 | Farmington Hills, MI 48334 | 248-702-0681 | Fax: 248-702-0684

Troy Office: 888 W. Big Beaver Rd., Suite 888 | Troy, MI 48084 | 248-689-7550 | Fax: 248-689-4376

Grosse Pointe Park Office: 787 Berkshire | Grosse Pointe Park, MI 48230
313-824-9095

 www.detroit-cpa.net

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