by Bill Griffith Bill Griffith No Comments

Correcting an Excess IRA Contribution

The deadline for correcting an excess IRA contribution for the 2018 tax year is coming up. If the excess amount is not removed according to a special formula, a penalty tax of 6% will accrue on excess amounts that remain in the owner’s IRA.  

An excess IRA contribution occurs when an IRA owner contributes more than the statutory limit to their IRA in a given year.  For the year 2018, the IRA contribution limit was the lesser of $5,500 or 100% of earned income.  An additional catch up contribution of $1,000 is available for individual’s age 50 or older.

An excess contribution can occur when an IRA owner simply contributes too much to their IRA in one tax year, such as by contributing more than the lesser of $5,500 or 100% of earned income. 

For example:  Say that in 2018, Mr. Smith, age 62 and single with earned income of $5,000 and rental income of $34,500, contributed $6,500 to his traditional IRA.  Mr. Smith has made an excess contribution of $1,500 to his IRA ($6,500 minus the $5,000 limit). The contribution limit is the lesser of $6,500 or 100% of earned income.  In this case, the rental income of $34,500 is not earned income.

Correcting an Excess IRA Contribution After Due Date

Individuals who contribute too much to their IRA have until their tax-filing deadline, including extensions, to correct any excess contribution.  Individuals who file their tax returns by April 15th and file for an extension have six months to remove the excess amount, which for calendar year taxpayers is October 15, 2019. 

If the excess amount is not removed according to a special formula, which determines the amount of the excess contribution plus interest or other income earned on the excess contribution, a penalty tax of 6% will accrue on excess amounts that remain in the owner’s IRA.  

by Bill Griffith Bill Griffith No Comments

Collecting Social Security Benefits

When should you start collecting Social Security benefits?  If you are approaching retirement age, you have most likely given much thought to the question of when you should begin receiving your Social Security retirement benefits.  The strategy that is most advantageous for you depends on your particular needs and circumstances.

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by Bill Griffith Bill Griffith No Comments

Social Security Death Benefits

Social Security Death Benefits

Social Security death benefits will terminate upon death, and sometimes upon marriage or divorce.  When you setup monthly benefits via direct deposit in a bank account, make sure you understand the rules and regulations that the bank will follow in specific circumstances. For example, what will the bank do in specific situations that involve the events which will terminate Social Security benefits? The Social Security rules determine what types of events cause the termination of benefits.

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by Bill Griffith Bill Griffith No Comments

Living Trust Can Avoid Probate

A living trust can avoid probate and ensure that your assets will pass to the beneficiaries you choose, and in the manner that you want.

A trust can be a fundamental part of planning for the future.  Trusts can help people avoid probate, unnecessary taxes, put their wealth to use in exactly the way they wish, accumulate assets for retirement or their beneficiaries, and much more.

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