Nonspouse beneficiaries have new options

If you are the beneficiary of a decedent's qualified retirement plan, and you are not the spouse of the decedent, you now have additional options for distributions. In the past, only a spouse beneficiary was permitted to roll the account into an IRA. Now, beginning in 2007,

if you are the beneficiary, you may roll the distribution into an IRA that has been established to receive the qualified plan.

Under this new option, you will be subject to the rules for distributions that apply to inherited IRAs, as opposed to the more strict rules that apply to distributions from qualified plans. Many qualified plans require beneficiaries to take the entire amount from the plan within five years of the date of death. The rules that apply to inherited IRAs allow the beneficiary to take distributions over his or her life expectancy, thus spreading the tax liability over several more years. If the decedent was over age 70'/2, the distribution rules are a bit different. Here you have the option of taking the distributions from the inherited IRA over your life expectancy, or the remaining life expectancy of the owner, assuming he or she was still living.

Tax Tips Small Business

  • New Rules for Spouses Who Operate a Business Together

    Do you qualify for simplified reporting?

    Spouses who operate a business together have a new option for reporting their business income. In the past, husband and wife joint owners were considered a partnership for reporting purposes. New rules, which took effect in 2007, give spouses the option of reporting their business income as two separate sole proprietorships.

    Read more ...

Small Business Quick Tip

  • Like Kind Exchange

    If you are disposing of property used in your business, you may want to consider a like-kind exchange to defer the taxable gain on the sale.
Saturday, 15th December 2018

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Tax Tips Personal

  • Converting a Traditional IRA to a Roth?

    You may want to wait

    At some point, taxpayers who have a traditional IRA may wish to convert it to a Roth. Roth IRAs are more flexible in that there are no required minimum distributions when the owner reaches age 70 1/2. In addition, qualified distributions from a Roth IRA are not taxable.

    Read more ...

Personal Quick Tip

  • Combat Pay

    Military personnel may elect to treat combat pay that is excluded from gross income as earned income in determining both eligibility for the earned income tax credit and the amount of that credit.