Tag Archives: IRA

Early Gift for Taxpayers – PATH Act Passed

Protecting Americans from Tax Hikes (PATH) Act
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Taxpayers received an early gift last week when the Protecting Americans from Tax Hikes (PATH) Act of 2015, also commonly referred to as the “extenders tax act,” was signed into law. This legislation permanently allows IRA participants over age 70½ to make annual tax-free distributions from their IRAs for charitable purposes.

Beginning immediately, a taxpayer, via direct transfer by the IRA trustee, can give up to $100,000 per year to the charitable organization of their choosing tax-free. The amount so distributable can count toward meeting a participant’s “minimum required IRA distribution,” but the amount so distributed will not be included in the participant’s Adjusted Gross Income.

Furthermore, since this IRA distribution is not included as income, no itemized deduction can be claimed for the corresponding charitable deduction.

In layman’s terms, the passage of PATH provides taxpayers an advantage by lowering their Adjusted Gross Income (AGI). A lower AGI results in a lower threshold for claiming various items on your individual tax returns, such as medical deductions, child tax credits, inclusions in income for example, Social Security, Roth IRA contributions, and the Obamacare 3.8% surtax on net investment income.

For more information and practical commentary regarding the PATH Act, review Accounting Today’s recent article or contact Aronson’s Tax Services Group at 301.231.6200.

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New 60-day IRA Rollover Rules Spell Trouble for Some

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Early this year, the U.S. Tax Court made a surprise ruling (Bobrow v. Commissioner) related to the 60-day IRA rollover rules. The ruling, which came as a shock to individuals and practitioners alike, completely contradicted the IRS’ previous position, the instructions in Publication 590 and years of practice.

Prior to the ruling, individuals could take distributions from their IRAs and, if they deposited the amount(s) or some portion thereof back into an IRA within 60 days, not have a taxable distribution. Previous guidance held that an individual could have multiple 60-day rollovers in a 12-month period if they had multiple IRAs. The new guidance now aggregates all IRAs for purposes of the 12-month period, meaning that an individual can only do one 60-day rollover in a 12-month period, regardless of the number of IRA accounts they hold. Trustee-to-trustee transfers are not affected by the ruling. This change will not impact many individuals, but it will certainly affect those that have become accustomed to using their IRAs for short-term loans.

Initially there was some level of hope that the IRS would reaffirm their 30-year position. However, such hope faded when they followed up with Announcement 2014-15, which postpones the Bobrow decision until January 1, 2015. The new rules apply to rollovers that take place after January 1, 2015.

If you have any questions, please contact Mark Flanagan of Aronson LLC’s Specialty Tax practice at 301.231.6257.

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