December 22, 2015

Don’t Lose Out on Your Retirement Account Distributions

You have spent your whole life reading articles and speaking with financial advisors telling you to save, save, save for retirement, but there are some important questions to ask about your retirement account and distributions. Have you been saving and not taken any money out of your retirement accounts?  Are you still working or retired but haven’t had to take any money out of your retirement accounts in order to live on?  Even if you have taken distributions from your retirement accounts this will serve as a great reminder.

Required Minimum Distributions

As we near the end of 2015, it is important that you take your Required Minimum Distributions (RMD) from retirement accounts if you are at least 70 ½ years old.  The tax law requires that individuals over the age 70 ½ make distributions from their tax-deferred (i.e. 401(K), 403(B), IRAs, etc.) retirement accounts annually.  If a person fails to make these distributions there is a 50% penalty on the RMD amount.  The penalty along with the tax on those required distributions is so substantial it’s likely you won’t see much cash from the RMD, instead giving it mostly to Uncle Sam.  For example, if your RMD for the year was $100,000 and you failed to distribute it on time the penalty would be $50,000.  Assuming a top tax rate of 39.6% federal and 6% state tax, you would have to pay $45,600 in taxes on that RMD when you finally make the distribution.  Effectively receiving $4,400 from the RMD that wasn’t distributed timely.

If you turned 70 ½ during 2015 you have some options with your tax-deferred retirement accounts.  In general for IRAs (Individual Retirement Accounts) you will need to make a “2015” distribution.  Only for the year you turn 70 ½ will you be able to take the distribution in either the current year, by December 31st or by April 1st of the following year.  In whichever year you take the “2015” distribution that will be the tax year it is taxed in.  For example, if you wait to take the “2015” required distribution by April 1, 2016, you will have 2 distributions taxed in 2016 (the “2015” distribution plus the “2016” distribution), as the “2015” distribution doesn’t count as your “2016” distribution.

401(K), 403(B), etc. plans have some different rules depending on the persons working situation.  In general, if the person is not currently working the distributions follow the same rules as with IRAs.  If a person is still working they may be allowed to delay required distributions from these accounts until the year they retire if they are over 70 ½.  This rule does not apply to some owners or self-employed persons.  You will want to check with an Anders advisor to help you determine your Required Minimum Distribution requirements for these types of plans.

In general once you have started taking RMDs from these retirement accounts you will need to do so annually by December 31st with the help of your plan administrator.

If you like to be charitable, think about making your IRA RMD directly to a qualifying charity.  Making this distribution to a charity would satisfy your need to make your distribution for the year.  The tax law allows for Qualified Charitable Distributions (QCD), where up to $100,000 per taxpayer is allowed to be made from your IRA to a qualified charity. You will want to make sure the distribution from the IRA goes directly to the charity in order for it to qualify as a QCD.  The important thing to note is that these charitable distributions from IRAs are not included in your Adjusted Gross Income (AGI), which can help you stay out of higher tax brackets and help keep your income under thresholds that trigger certain other taxes on investments.  With the QCD you effectively get a tax deduction for donating to charity by not being required to pick up the distribution into income. This tax provision was just extended permanently, so if you have already taken your RMD for 2015 you may want to take advantage of this rule in future years.

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December 17, 2015

Do Our Contributions Count Toward the Health FSA Limit?

Question: Our company’s cafeteria plan includes a health Flexible Spending Account (FSA) that has always been funded solely by employee salary reductions. For next year, however, we’re thinking about adding an employer contribution feature ― such as a matching or seed contribution. Would these employer contributions count toward the limit that applies to health FSAs?

Answer: The statutory limit ($2,550 for plan years beginning in 2015 or 2016) applies only to health FSA salary reduction contributions. Nonelective employer contributions, such as the matching or seed contributions you mention, generally don’t count toward the limit. But if employees may elect to receive the employer contributions in cash or as a taxable benefit, the contributions will be treated as salary reductions and will count toward the limit if contributed to the health FSA.

Employer contributions may also raise other compliance issues. For example, if the employer contribution amount varies among employees, the plan could fail to comply with nondiscrimination rules.

Also, for a health FSA to qualify as an excepted benefit, the maximum benefit payable for the year must not exceed:

  • Two times the employee’s health FSA salary reduction election for the year, or
  • If greater, the amount of the employee’s health FSA salary reduction election for the year plus $500.

A health FSA’s failure to qualify as an excepted benefit may subject you to potential penalties under the Affordable Care Act and could trigger additional obligations under COBRA and other laws.

Health FSAs funded exclusively by employee salary reductions (with annual coverage capped by the amount of the annual salary reduction election) will, by definition, satisfy the “maximum benefit payable” condition described above. But if employer contributions can also be allocated to employees’ health FSAs, care must be taken to ensure those contributions don’t cause the health FSA to fail to meet the condition.

Finally, remember that employer contributions that an employee can also elect to receive in cash or as a taxable benefit are treated as salary reductions for purposes of the “maximum benefit payable” condition, and that other requirements must also be met for a health FSA to qualify as excepted.

© 2015

If you have questions regarding the Affordable Care Act, contact an Anders advisor..

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December 17, 2015

Dave Finklang Named to St. Louis Business Journal’s 40 Under 40

Dave M. Finklang, CPA/CGMA, MBA, Tax Manager and leader of Anders’ Startup and Emerging Companies niche, has been named a 40 Under 40 honoree for 2016 by the St. Louis Business Journal. At 31 years old, Dave is one of the youngest 40 Under 40 recipients.

Dave was selected by a panel of former 40 Under 40 winners from a pool of more than 650 nominations.  A special section of the St. Louis Business Journal featuring the other honorees will be published in the February 12th edition of the newspaper. An awards dinner honoring the winners will be held on Thursday, February 18th at the Chase Park Plaza.

Why Dave?

Since joining Anders in 2013, Dave has been instrumental in the formation of the Anders Startup and Emerging Companies niche. He is a forward-thinking leader, and has established Anders as a go-to in accounting and advisory services for startup businesses. Dave has been able to bring together staff from across the firm in different service areas to provide clients with the best, most comprehensive financial experience possible. From business valuation, to audit, to tax work, to cloud solutions, to technology, the startup team is able to consult and advise on an array of topics that will ultimately help these companies get off the ground.

Dave currently serves as President of the board for Friends of Arch Grants, and is a member of St. Louis Arch Angels. Dave regularly attends events at T-Rex, the Missouri Venture Forum, and has represented Anders at St. Louis Startup Connection, and St. Louis Startup Weekend three years in a row. He was most recently named as one of the Top 100 St. Louisans to Know to Success in Business by Small Business Monthly. Dave’s individual accomplishments are well known in the startup community, but he also has made the most of Anders’ commitment to startups through sponsorships with Missouri Growth Association, Association for Corporate Growth, the Partnership for Downtown St. Louis, and T-Rex.

On a civic level,  Dave serves as director for the Testicular Cancer Society, is a mentor angel for Imerman Angels, and a board member on the University of Central Missouri School of Accountancy Advisory Board.

View the full 2016 40 Under 40 list.

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December 2, 2015

Established Triple Net Lease to Shelter $25,000 from Double Taxation

We were able to help a client establish a triple net lease to shelter approximately $25,000 of corporate income from double taxation and/or self-employed tax.

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December 2, 2015

Helped Satisfy Non-Taxable Life Insurance Proceeds with Cross Purchase Agreement

Our Real Estate and Construction Group helped a client establish a cross purchase agreement that helped satisfy both non-taxable life insurance proceeds, and the purchase of the remaining shareholders interest with a basis step up upon death.

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