Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
IRS eases a costly tax pitfall for retirement savers: Taxpayers who miss the 60-day deadline for transferring money from a retirement account to an IRA can fix the mistake and avoid paying income taxes by explaining their case to the IRS, under new relaxed rules from the agency, according to Money. Taxpayers can make a written self-certification citing one of the acceptable circumstances for why they failed to transfer the money on time. “This is a big deal and it will help a lot of people,” says a CPA. – Money
Tax-smart ways to save when you're too old for a traditional IRA: Seniors no longer qualify to contribute to a traditional IRA if they have reached the age of 70-1/2, according to Kiplinger. Those who still want to save may consider contributing to a Roth IRA, as the account has no age limit for contributions and offers tax-free growth on savings as well as tax-exempt distributions. Clients' income for this year should not exceed $132,000 (if they are single) or $194,000 (if they are married couples filing joint returns) to contribute to a Roth IRA. -- Kiplinger
Why 401(k)s are bad for people without a college degree: Clients who earn a college degree are more likely than those who just complete high school to sign up and save in a defined-contribution pension plan, according to Morningstar. “We show an important independent effect of education on not only the decision to participate, but also how much money to set aside when participating, net of earnings and structural position in labor markets,” said the firm's researchers. "These enrollment and savings decisions may not only be influenced by job factors such as a worker’s earnings level, but also by non-labor market mechanisms that may include a person’s amount of financial knowledge and his or her concern with planning for the future, of which less educated people may have lower levels." – Morningstar
What's a qualified personal residence trust, and why should your client have one? Creating a qualified personal residence trust is a tax-saving strategy that investors can use to take advantage of the current estate tax exemptions, according to the Motley Fool. Clients can use a QPRT to give their primary home or a vacation home to their loved ones at a specified date in the future based on a discounted value, thus reducing the amount of gift and estate taxes they pay. In some cases, a QPRT can eliminate the entire tax liability. -- Motley Fool
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