Baby boomers’ 2016 birthday gift to IRS

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Baby boomers reach a momentous tax birthday this year, but it’s the Internal Revenue Service that will be getting presents.

The first baby boomer was born on Jan. 1, 1946. Yes, that’s been documented. Kathleen Casey-Kirschling has this distinction.

Important RMD birthday

As Casey-Kirschling and her peers reach age 70 1/2, if they have money in traditional IRAs or other tax-deferred retirement accounts, such as workplace 401(k)s, they must start taking out some of those funds.

This process is known as required minimum distributions, or RMDs. They are based on actuarial data and require affected account holders to calculate how much to take out of these accounts based on their ages.

Exactly how much to withdraw is spelled out in one of several IRS tables, the most commonly used being the Uniform Lifetime Table.

The reason for the RMD rule is simple. Uncle Sam is tired of waiting for folks to withdraw their retirement funds that are growing without being taxed. By making account holders take out at least some of the money when they hit 70 1/2, the U.S. Treasury starts getting taxes, at ordinary tax rates, on at least some of the holdings.

Age-based withdrawal amounts, deadlines

Basically, you take the total value of all your deferred retirement accounts at the end of the year just before the one in which you hit 70 1/2 and divide it by the amount shown in the IRS table for your age.

That’s the amount you must withdraw and pay taxes on when you file your next tax return.

You get a brief reprieve in the year in which you turn 70 1/2. You can postpone that first RMD until the following April 1st. For the new RMD baby boomers this year, that means taking their first RMD by April 1, 2017.

But that also means in 2017, they’ll have to take 2 RMDs: the deferred 2016 tax year withdrawal and the one for 2017, which must be made by Dec. 31.

Birthday tax math time

Happy birthday, boomers! Now do the math. Bankrate’s RMD calculator can help.

If it’s better for you to make your first RMD this year, do so by the end of the year.

If, however, for your financial and tax purposes, it’s better to wait until next April for your initial RMD, then wait. As long as you meet that deadline, the IRS is willing to wait for its present from you for hitting this tax-important half birthday.

RMD alternatives

Just because you must take out the money doesn’t mean you have to spend it. You can put it back into some other, taxable account where it can keep growing.

Or if you’re feeling philanthropic, you can have your RMD amount directly transferred to your favorite nonprofit. You won’t get a tax deduction for the RMD-based charitable gift, but you won’t have to pay income tax on the donated amount.

High cost of missing RMD deadline

But don’t miss the required retirement account withdrawal. The penalty is stiff.

Not making your prescribed RMD on time means that in addition to the required withdrawal amount, you’ll owe Uncle Sam an additional 50% of the amount that you should have taken from your accounts.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.


Retirement Planning Means Peace of Mind in Boca Raton

Herman Boca Blog

Boca Raton offers beautiful beaches, world-class shopping, amazing restaurants and warm weather all year round, what’s not to love? That’s why, when thousands of Americans retire every year, many move to sunnier climates in Florida to enjoy the relaxation that comes with retirement. In a fluctuating economy, however, retirement planning doesn’t end on your last day of work. The expert team at Herman & Company CPA’s, PC offers unparalleled planning services to make your retirement even easier. For our clients enjoying sun and sand in Boca Raton, Florida, the team at Herman & Company CPA’s, PC provides integral support to ensure the relaxation and peace of mind that you deserve.

Retirement planning for Boca Raton

Herman & Company CPA’s, PC offers accounting services for both retirees and those planning for retirement. Wise retirement planning is all about preparation and taking stock of your portfolio! We have a well-deserved reputation for saving clients money and looking to the future to ensure optimal returns every year. As trusted financial advisors, we work with our clients to create individualized strategies to safeguard their portfolios. We take pride in navigating the complex world of taxes to save our clients time, money and undue stress.

Bright futures for Florida retirees

How you manage your investments and savings will determine the quality of your lifestyle after your retire. However, these decisions don’t need to be made alone; with offices in New York and Florida, Herman & Company CPA’s, PC is committed to helping our clients afford a lifetime of financial stability. With our personalized touch, advanced accounting tools, and up-to-date knowledge of economic trends and policy changes, we help our clients protect their savings and investments.

Retirement planning should be easy, but the complicated world of financial policy can cause unnecessary stresses and lost savings. With over thirty years of experience, the team at Herman & Company CPA’s, PC has successfully guided hundreds of clients through annual taxes and wise financial planning decisions, always with the same mission: to provide our clients with personalized support and financial stability. 

Social Security and Medicare Amounts for 2015

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

The annual inflation adjustments have also impacted the various Social Security amounts and thresholds for 2015.


The Social Security wage base, for computing the Social Security tax (OASDI only), increases to $118,500 in 2015, up from $117,000 for 2014. There is no taxable earnings limit for Medicare (HI only) contributions. However, there is a 0.9% Medicare surtax that is imposed on wages and self-employment (SE) income in excess of the modified adjusted gross income (MAGI) threshold amounts of $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for all other taxpayers. The MAGI thresholds are not adjusted for inflation. The surtax does not apply to the employer portion of the tax.

For Social Security beneficiaries under the full retirement age, the annual exempt amount increases to $15,720 in 2015, up from $15,480 in 2014. These beneficiaries will be subject to a $1 reduction in benefits for each $2 they earn in excess of $15,720 in 2015. However, in the year beneficiaries reach their full retirement age (FRA), earnings above a different annual exemption amount ($41,880 in 2015, up from $41,400 in 2014) are subject to $1 reduction in benefits for each $3 earned over this exempt amount. Social Security benefits are not reduced by earned income beginning with the month the beneficiary reaches FRA. But remember, Social Security benefits received may be subject to federal income tax.

The Social Security Administration estimates the average retired worker will receive $1,328 monthly in 2015. The average monthly benefit for an aged couple where both are receiving monthly benefits is $2,176. These amounts reflect a 1.7% cost of living adjustment (COLA). The maximum 2015 Social Security benefit for a worker retiring at FRA is $2,663 per month, up from $2,642 in 2014.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.