Month: August 2022

There are many ways people plan for retirement. Individual Retirement Arrangements, or IRAs, are a common one. IRAs provide tax incentives for you to make investments that can provide financial security for you and your family once you retire. These accounts can be with a bank or other financial institution, a life insurance company, mutual fund, or a stockbroker.

Traditional IRAs

Here are some things you should know about traditional IRAs:

• A traditional IRA is a tax-advantaged personal savings plan where contributions may be tax deductible.
• Generally, the money in a traditional IRA isn’t taxed until it’s withdrawn.
• There are annual limits to contributions depending on your age and the type of IRA.
• When you’re planning when to withdraw money from an IRA, you should know that:
  • You may face a 10% penalty and a tax bill if you withdraw money before age 59½, unless you qualify for an exception.
  • Usually, you must start taking withdrawals from your IRA when you reach age 72. For tax years 2019 and earlier, that age was 70½.
  • Special distribution rules apply for IRA beneficiaries.

Roth IRAs

A Roth IRA is another tax-advantaged personal savings plan with many of the same rules as a traditional IRA but there are exceptions:

• A taxpayer can’t deduct contributions to a Roth IRA.
• Qualified distributions are tax-free.
• Roth IRAs don’t require withdrawals until after the death of the owner.

Other Types of IRAs

Although Traditional IRAs and Roth IRAs are the most commonly used types of IRAs, there are a few other types of IRAs that you might encounter:

• Savings Incentive Match Plan for Employees. A SIMPLE IRA allows employees and employers to contribute to traditional IRAs set up for employees. It is suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
• Simplified Employee Pension. A SEP IRA is set up by an employer. The employer makes contributions directly to an IRA set up for each employee.
• Rollover IRA. This is when the IRA owner receives a payment from his or her retirement plan and deposits it into a different IRA within 60 days.

So there you have it – some of the most common types of IRAs that you might run into. If you have questions about using an IRA to save for retirement, or about setting one up, please contact our office. We would be happy to help.

Business travel can be costly. Hotel bills, airfare or train tickets, cab fare, public transportation – it can all add up fast. The good news is that if you travel for business, you may be able off-set some of those costs by claiming business travel deductions when you file your taxes. Here’s what you need to know.

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day’s work and a need for sleep or rest to meet the demands the work while away.

Travel expenses must be "ordinary and necessary." That means that expenses that are lavish, extravagant, or for personal purposes can’t be deducted.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business and there are special rules for conventions held outside North America.

Deductible travel expenses while away from home include the costs of:

• Travel by airplane, train, bus or car between your home and your business destination.
• Fares for taxis or other types of transportation between an airport or train station to a hotel, from a hotel to a work location.
• Shipping of baggage and sample or display material between regular and temporary work locations.
• Using a personally owned car for business which can include an increase in mileage rates.
• Lodging and non-entertainment-related meals.
• Dry cleaning and laundry.
• Business calls and communication.
• Tips paid for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to the business travel.

Finally, don’t forget to keep records to substantiate your deductions. Records such as receipts, canceled checks, credit card statements, and other similar documents will allow your tax preparer to get you the maximum deduction that you are entitled to.