Newsletter Date: November 5, 2009
Volume 10 Issue 12
DECEMBER ISSUE
December 18, 2015
Inside This Issue:
Top Year-End IRA Reminders
1-2
Last Minute Tax Planning Strategies To Consider
1-2
2016 Wage-Tax Limits
2
Top Year-End IRA Reminders
Individual Retirement Accounts (IRAs) are important vehicles to save for retirement. If you have an
IRA or plan to start one soon, here are a few key
year-end rules to know.
Know the limits. You can contribute a maximum
of $5,500 ($6,500 if you are age 50 or older) to a
traditional or Roth IRA. If you file a joint return,
you and your spouse can each contribute to an IRA
even if only one of you has taxable compensation.
You have until April 18, 2016, to make an IRA
contribution for 2015.
Avoid excess contributions. If you contribute
more than the IRA limits for 2015, you are subject
to a 6 percent tax on the excess amount. The tax
applies each year that the excess amounts remain
in your account. You can avoid the tax if you withdraw the excess amounts from your account by the
due date of your 2015 tax return (including extensions).
Take required distributions. If you’re at least
age 70½, you must take a required minimum distribution (RMD) from your traditional IRA. You
are not required to take a RMD from your Roth
IRA.
Continued on next page
Last Minute Tax Planning
Strategies To Consider
In between preparing for the year-end holidays,
school vacations, travel, work, and so on, tax planning should not be on the back burner. Although
2015 is quickly coming to a close, there is still
time, with careful planning, to execute some last
minute tax strategies. In many cases, these strategies can help minimize the tax burden.
Extenders
For many taxpayers, one of the most significant
questions looming over 2015 returns is will they
be able to claim all the deductions, credits and incentives that were available in 2014? Many of
these incentives are grouped in a package known
as the tax extenders. If you have taken in 2014 (or
in a prior year) the state and local sales tax deduction, higher education tuition deduction, teacher’s
classroom expense deduction, IRA distribution to
charity, among others, you enjoyed the benefit of a
tax extender.
Continued on next page
Volume 10, Issue 12
Top Year-End IRA Reminders...continued from page 1
You normally must take your RMD by Dec. 31,
2015. If you turned 70½ in 2015, the deadline is
April 1, 2016. If you don’t take your RMD on time
you face a 50 percent excise tax on the RMD amount
you failed to take out.
IRA distributions may affect your premium tax
credit (PTC). If you take a distribution from your
IRA at the end of the year and expect to claim the
PTC, you should exercise caution regarding the
amount of the distribution.
Taxable distributions increase your household income, which can make you ineligible for the PTC.
You will become ineligible if the increase causes
your household income for the year to be above 400
percent of the Federal poverty line for your family
size. In this circumstance, you must repay the entire
amount of any advance payments of the premium tax
credit that were made to your health insurance provider on your behalf. †
Contact Marcia if you have any questions.†
2016 Wage-Tax Limits
Page 2
Last Minute Tax Planning Strategies To Consider...continued from page 1
Under current law, these popular tax breaks expired after 2014. That means they are no longer
available for 2015, unless they are renewed by
Congress. A vote is expected before January 1,
2016. However, Congress could delay the vote
until early January. Uncertainty is never far from
the extenders, but the best approach is to develop
a year-end planning strategy that reflects both an
extension of the extender and develop another
plan that does not.
Traditional techniques
The roster of traditional year-end tax planning
strategies is lengthy and often involves methods
to shift income between 2015 and 2016. To postpone income to 2016, taxpayers can consider
delaying plans to sell appreciated assets, redeem
U.S. savings bonds, completing Roth IRA conversions, and so on. If possible, it may be worthwhile to postpone any bonuses until after 2015.
In contrast, some taxpayers may want to accelerate income into 2015. This can be particularly
valuable if a taxpayer expects to be in a higher
tax bracket in 2016 compared to 2015.
Gift-making
Social Security (SS) wage base: $118,500
SS percentage: 6.2% (subject to change)
Maximum SS withholding: $7,347
Medicare wage base: NO LIMIT
Medicare percentage: 1.45%
SUI/FUTA wage base: $7,000
SUI rate: Ranges from 1.5% to 6.2%
SDI wage base: $106,742
SDI percentage: 0.9%
Maximum SDI withholding: $960.68
CA minimum wage: $10.00
If you have any questions regarding any of these
limits, please call our office. †
Gift-making is an important year-end tax strategy that can be overlooked. The Tax Code allows taxpayers to give away up to an “annual
exclusion amount” per recipient, per year, free of
gift tax. For 2015, the annual exclusion amount
is $14,000. If property is given instead of cash,
the value of the gift is the fair market value of
the property. If spouses consent to split all gifts
that are made by either one of them during any
year and each spouse is also a U.S. citizen or
resident, then the gifts can be deemed as having
been made one half by each spouse. As a result,
spouses who consent to split their gifts can transfer twice the annual per-recipient exclusion
amount each year, free of gift tax ($28,000 for
2015). †
Please contact our office for more information.†