Monthly Archives: May 2014

Do You Know the Tax Pitfalls of Mutual Funds

mutual fundsHere are two tax pitfalls to be aware of

Investing in mutual funds is an easy way to diversify a portfolio, which is one reason why they’re commonly found in retirement plans such as IRAs and 401(k)s.  Beware of these two tax pitfalls if you hold such funds in taxable accounts, or are considering such investments:

  1. Mutual funds with high turnover rates can create income that’s taxed at ordinary-income rates.  Choosing funds that provide primarily long-term gains can save you more tax dollars because of the lower long-term rates.
  2. Earnings on mutual funds are typically reinvested, and unless you keep track of these additions and increase your basis accordingly, you may report more gain than required when you sell the fund.  Since 2012, brokerage firms have been required to track and report to the IRS your cost basis in mutual funds acquired during the tax year.  So make sure to keep careful track.

If your mutual fund investments aren’t limited to your tax-advantaged retirement accounts, we’d be pleased to help you assess the potential tax impact and suggest ways to minimize your tax liability.  Contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information.

Mr. Komos is the Partner-in-Charge of Ciuni & Panichi, Inc.’s  Tax Department.  He has experience in all facets of taxation for individuals, closely held businesses, their owners and key personnel.  His clients are in a wide range of industries, including manufacturing, service, real estate, and construction.

You may also be interested in:

Taxes and a Charitable Remainder Trust

Tax Liability and the Wash Sale Rule
© 2014

Short-term ACA Relief Now Available for Midsize and Large Employers

AACA Health Care ReformRecently released IRS final regulations for the Affordable Care Act’s (ACA’s) employer shared-responsibility provision provide some short-term relief for midsize and large employers.

Under the ACA, the shared-responsibility provision (commonly referred to as “play-or-pay”) applies to “large” employers — those with the equivalent of 50 or more full-time employees. Play-or-pay had been scheduled to go into effect in 2014, but last year, the IRS pushed that out to 2015. Now, under the final regulations, eligible midsize employers that otherwise would be considered large employers under the ACA won’t be subject to the provision until 2016.

To Qualify for the Midsize-Employer Relief, an Employer Must:

      • Employ on average fewer than 100 full-time employees, or the equivalent, during 2014,
      • Maintain its workforce size and aggregate hours of service,
      • Maintain the health care coverage it offered as of Feb. 9, 2014, and
      • Certify that it meets these requirements.

Some Relief for Large Employers as Well

The final regulations also provide some relief for large employers that don’t qualify for the midsize-employer relief.  In 2015, they can avoid the penalty for not offering minimum essential coverage by offering such coverage to at least 70% of their full-time employees, rather than the 95% originally scheduled. The 95% requirement will apply in 2016 and beyond.

The final regulations also clarify certain aspects of the play-or-pay provision. Please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information. You can also submit an inquiry on our contact us page.

To read more about Ciuni & Panichi’s Employee Benefit Plan Services, including employee benefit plan financial audits, preparation of annual Form 5500 filings, annual compliance tests required by ERISA and the IRS, and much more, visit our Employee Benefit Plan Services page.

Related posts covering employer-sponsored benefits:

FSA Plans: Employers, Have You Amended Your Plans to Allow Rollover?

Do an Employee Benefit Plan Audit Before the IRS or DOL

Retirement Planning: When to Increase Contributions

Should you Increase your Retirement Plan Contributions in 2014?

Retirement PlanningIt’s time to start thinking about 2014 retirement plan contributions. Contributing the maximum you’re allowed into an employer-sponsored defined contribution plan is likely a smart move.

Retirement Planning: Contributing the Maximum

When planning for retirement, you can reap major benefits from maximum contributions for these reasons:

1. Retirement plan contributions are typically pretax.
2. Retirement plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
3. Your employer may match some, or all, of your contributions pretax.

Also, consider contributing to a traditional IRA. If you participate in an employer-sponsored retirement plan, your IRA deduction may be reduced or eliminated, depending on your income. But you can still benefit from tax-deferred growth.

Consider your Roth options as well. Contributions aren’t pretax, but qualified distributions are tax-free.

Retirement plan contribution limits generally aren’t going up in 2014, but consider contributing more this year if you’re not already making the maximum contribution. And, if you are already maxing out your contributions, but you’ll turn age 50 in 2014, you can put away more this year by making “catch- up” contributions.

Type of contribution 2014 limit
Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans $17,500
Contributions to SIMPLEs $12,000
Contributions to IRAs $5,500
Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans $5,500
Catch-up contributions to SIMPLEs $2,500
Catch-up contributions to IRAs $1,000

For more retirement planning ideas on making the most of tax-advantaged retirement-savings options, contact Jim Komos at 216-831-7171 or via email at jkomos@cp-advisors.com. You can also submit an inquiry at our contact us page.

Related Services:

Retirement Plan Design

Wealth Management: Retirement Accumulation

Tax Deduction – Is My Elderly Parent a Dependent?

Are You Missing Out on Tax Deductions?elderly

The answer could be yes.  For you to take the dependent tax deduction up to $3,900 on your tax return under the adult-dependent exemption, the parent must have less gross income for the tax year than the exemption amount.  Generally, Social Security is excluded, but payments from dividends, interest, and retirement plans are included.

You must have contributed more than 50% of your parent’s financial support, and if the parent lived with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your home.

If you shared caregiving duties with a sibling and your combined support exceeded 50%, the tax deduction can be claimed even though no one individually provided more than 50%.  However, only one of you can claim the tax deduction.

The adult-dependent exemption is just one tax deducation that you may be able to employ to ease the financial burden of caring for an elderly parent.  Conact our tax professionals or Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information on qualifying for this break or others.

You may also be interested in:

Tax Filing Deadlines – Don’t Miss Them