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Our newsline provides the latest news from the IRS, due dates, reminders, and thoughtful insights on accounting and tax related topics

Effect of Secure Act on Stretch IRA's

12/23/2019

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Beneficiaries, or inheritors, of non-spousal IRA accounts under 2019 law may have been able to withdraw required minimum distributions over their lifespan, ensuring a continual flow of income and minimizing tax burden.  
 
The Secure Act will require beneficiaries to withdraw all assets of an inherited account within 10 years. There are no required minimum distributions each year as long as the entire balance is distributed within 10 years.  
 
This change may potentially increase tax burden by bumping beneficiaries up to a higher tax bracket in the year of distribution(s).  Tax planning may help to minimize the tax burden on such distributions.
 
  • Distributions could be spread out over multiple years within the 10 year distribution time frame to achieve a lower tax bracket when combined with other income each year than if taken all at once.

  • ​A traditional IRA could be converted into a Roth IRA, thus paying the taxes currently, so that beneficiaries would enjoy tax free distributions later under current law when they inherit the IRA.   

​The amount of the inherited IRA combined with other income and current tax brackets will determine whether these and other tax strategies may be helpful.

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Secure Act Increases Age for Required Minimum Distributions from IRAs to 72 & Removes Age Limit for Contributions

12/23/2019

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Recent legislation, known as the Secure Act, raised the age for required minimum distributions to 72 beginning in 2020. It also removed the age limit for contributions to traditional IRAs beginning in 2020.

2019 Required Minimum Distributions

The Secure Act does not change the rules for 2019.  
You may need to take a required minimum distribution from your IRA or retirement plan account by the end of the year:
  • If you’re at least age 70½ this year, or
  • If you’ve inherited an IRA or retirement account.
Contributions are not allowed after age 70½. 

Required Minimum Distributions Beginning in 2020
You may need to take a required minimum distribution from your IRA or retirement plan account by the end of the year:
  • If you reach age 72 during the year, or
  • ​If you’ve inherited an IRA or retirement account.
There is no age limit for contributions, though income limitations still apply.
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Interest rates remain the same for the first quarter of 2020

12/6/2019

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WASHINGTON —The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2020.  The rates will be:  

  • 5% for overpayments [4% in the case of a corporation];
  • 2.5% for the portion of a corporate overpayment exceeding $10,000;
  • 5% for underpayments; and
  • 7% for large corporate underpayments. 

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2019, to take effect Nov. 1, 2019, based on daily compounding.
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