tax code

IRS Seeks Taxpayer Input For 2017-18 Priority Guidance Plan

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!

By Tax-News

IRS Tax Feedback

The Internal Revenue Service (IRS) and the Treasury are seeking feedback on what guidance should be prioritized to clarify parts of the tax code and explain policies.

The 2017-18 Priority Guidance Plan is intended to “identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.”

The IRS said that this year’s consultation is particularly important in light of the recent Executive Order no. 13771, on “Reducing Regulation and Controlling Regulatory Costs.” This order requires federal agencies to repeal two existing regulations for every new regulation, whilst reducing the cost of regulations. As well as asking for feedback on areas where guidance and clarification is required, the agency is hoping to hear from taxpayers as to how to reduce taxpayer compliance burdens while complying with that Order.

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.

 

Plan would give retirement savers more time

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!

By Bankrate

give retirement savers more time

Sen. Ron Wyden, D-Ore., proposes to change some aspects of the way people must take retirement withdrawals from tax-deferred accounts. Chip Somodevilla/Getty Images

I admit it. I’m thinking about retirement. Of course, I’ve been thinking about retirement since I was 30.

Back then, my retirement thoughts were (mostly) about socking away money for my post-career years. Now they’re about how to take that money out so that I can enjoy the type of retirement I want.

The tax code makes some withdrawal decisions for retirement savers. If you have a traditional IRA or other tax-deferred account like a 401(k) workplace plan, you must take what are known as required minimum distributions once you hit age 70 1/2.

Sen. Ron Wyden, D-Ore., thinks that age trigger needs to be changed.

RMD details

Required minimum distributions, or RMDs in Internal Revenue Service acronym-speak, is the amount you must take out of tax-deferred retirement accounts each year once you hit that septuagenarian half-birthday.

The reason is obvious. Uncle Sam is tired of waiting to collect taxes on all that retirement money that’s been sitting untouched, in many cases for decades.

The specific withdrawal amounts are a percentage of your total tax-deferred retirement account balances, based on your age.

What if you don’t need or want to touch your traditional IRA or similar account when you get into your 70s? Tough.

Fail to take your annual RMD and you’ll be hit with a penalty that’s 50% of what you should have withdrawn.

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Waiting longer on RMDs

Wyden, who is the ranking Democrat on the tax-writing Senate Finance Committee, wants to push back the RMD age.

In a proposal that Wyden is calling the Retirement Improvements and Savings Enhancements, or RISE, Act, he proposes bumping up the RMD age to 71 in 2018.

The age mandating retirement account distributions then would be increased to 72 in 2023, 73 in 2028 and, thereafter, would be adjusted based on actuarial estimates of increases in life expectancy.

“The ‘required minimum distribution’ age of 70.5 years has remained unchanged since the early 1960s,” says Wyden. Since then, life expectancy has risen, but the target withdrawal age for retirement accounts has not moved. Wyden’s proposal essentially is a life-expectancy inflation adjustment.

No RMDs for smaller amounts

Wyden also thinks it’s unfair to force savers to deplete their retirement savings within a certain time frame when they don’t have huge sums in their tax-deferred accounts.

The RISE Act would exempt owners of traditional IRAs and similar RMD-affected accounts from the mandatory withdrawal rules if balances in their retirement plans come to less than $150,000.

This flexibility, says Wyden, will let owners of small retirement accounts use that money as they need during their older years.

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Tell Wyden what you think

Wyden acknowledges that some already are questioning some of his proposals.

For example, there is concern from plan managers that the $150,000 exemption level would be hard to administer.

So Wyden is seeking public input on this and other portions of the RISE Act.

The measure, he notes, is not a formal piece of legislation (yet). Rather, it’s a discussion draft. It is being circulated specifically to get reaction, review and comment. “The responses will be reviewed and, if appropriate, incorporated into legislation,” says Wyden.

You can email your thoughts on the RISE Act to Retirement_Savings@finance.senate.gov. If you prefer snail mail, address your thoughts to Wyden at Senate Committee on Finance, 219 Dirksen Senate Office Building, Washington, D.C. 20510.

Bankrate also would like to hear from you on not only the RISE proposal discussed here, but other retirement savings issues. Do you find tax laws help you sock away cash for your golden years? Or are the retirement account tax rules too complicated or restrictive?

Keep up with federal and state tax news, as well as find filing tips, calculators and more at Bankrate’s Tax Center.

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.

Rich taxpayers tend to be rewarded

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!

By Bankrate

taxes-blog-rich-taxpayers-rewarded

Here’s a news flash that’s not news: The richest Americans have shaped the U.S. tax code so that it saves them potentially billions.

The reason the rich essentially have what the New York Times calls their own private tax system is simple. They can afford to hire the best and brightest tax attorneys and accountants.

Those tax experts, according to the newspaper’s special report, employ a “dizzying array of tax maneuvers” to help the very wealthy shield their fortunes. “Operating largely out of public view – in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service – the wealthy have used their influence to steadily whittle away at the government’s ability to tax them,” write reporters Patricia Cohen and Noam Scheiber.

And those same wealthy tax break beneficiaries are, according to the New York Times’ story, “providing much of the early cash for the 2016 presidential campaign.”

So how are those political contributions working out?

GOP tax plans favor the wealthy

Donald Trump, the leader in many polls for the Republican nomination, talks a good tax game. He is, after all, a salesman. And he’s slammed the millions that hedge fund managers make by, in his words, pushing paper.

But he also wants to end the estate tax, which applies only to a statistically tiny group of rich U.S. taxpayers.

An analysis of Trump’s tax plan by the Washington, D.C.-based Tax Policy Center, or TPC, shows that its greatest benefits will go to The Donald’s peers, the wealthiest Americans. TPC’s analysts say Trump’s proposal would grant the top 0.1% a tax cut of almost 19%, while providing the lowest income bracket a tax break of only about 1%.

The same can be said about another Republican White House hopeful, Jeb Bush, who also favors repeal of the estate tax. The TPC says that under the former Florida governor’s tax plan, the top 0.1% of U.S. taxpayers would get about a 12% tax break, while the lowest income bracket would see a 1.4% tax break.

Sen. Marco Rubio, R-Florida, who’s moving up in the polls, wants to condense the current 7 tax rates to just 3. Tax Foundation analysts say that would provide the largest benefits to the lowest-income Americans, who would see their after-tax incomes rise by more than 44%. But the next largest group of beneficiaries under Rubio is the country’s highest-income earners, who would see their after-tax incomes grow by 11.5%.

Democrats less helpful to wealthy’s tax concerns

The rich don’t fare as well under proposals by the 2016 Democratic presidential hopefuls.

Front-runner Hillary Clinton is calling for, among other things, enactment of the Buffett Rule. This proposal, named after the financier Warren Buffett, would require that the rich pay at least a minimum ordinary income tax rate instead of primarily lower capital gains tax rates.

Bernie Sanders, Clinton’s nearest competitor, would like to see a new top tax rate of at least 50%. Income falling into the current top income bracket is taxed at 39.6%.

Flat, but not that fair tax

Then there are the flat taxers. Proposals to do away with the current progressive tax system and enact 1 tax rate to be paid by all are touted by several Republican candidates: retired neurosurgeon Ben Carson (a 15% rate), Texas Sen. Ted Cruz (10%), Kentucky Sen. Rand Paul (14.5%) and former Pennsylvania Sen. Rick Santorum (20%).

While one rate for all sounds like a fair plan, our current progressive tax rates are more beneficial for lower-income taxpayers.

And, as the New York Times reports, the wealthy have become quite adept at dealing with our 7 tax brackets and assorted other tax laws so that they don’t suffer as much at the hands of the IRS.

So basically, the bottom line is that the rich rule when it comes to taxes. And not to be a nay-saying cynic, but changing that is going to take much more than one election cycle.

Still, we have to start somewhere and voting is a great beginning. We average Joe and Jane taxpayers who are very far from rich must make all public office candidates address our tax issues and hold them accountable for our concerns.

We can’t afford to be swayed by swagger and snippets of tax proposals that, on the surface, sound appealing, but that in reality don’t do us much tax good at all.

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.

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.