Certified Public Accountant Addresses Potential Retirement Account Tax Changes
Certified Public Accountants are listening to the chatter between Congress and the President concerning changes to 401(k)s and IRAs. There is a lot of money set aside for people\’s retirements and the government has set its eyes on possible tax revenues. In 2011, there was a reported $4.86 trillion in IRA investments and $3.96 trillion invested in defined contribution plans which includes 401(k)s. It isn\’t surprising to hear that the government has taken notice of these figures.
Beginning in October, President Obama will be seeking changes to the IRA and 401(k) plans. The following are three examples in which small business owners and individuals might be affected.
The President is proposing that beneficiaries must withdraw the money form the inherited IRA within 5 years of the owner\’s death. Right now, people other than spouses can withdraw money throughout their lifetime. Certain beneficiaries will be exempt of this new law, but the rest will be forced to draw out larger amounts and face bigger tax bills.
The White House would like to see a savings cap on retirement accounts. When pooled together, a person\’s tax-deferred accounts that produces a joint and 100% survivor annuity of $205,000 a year (which currently takes approximately $3.4 million) would then be capped prohibiting additional contributions. This change would not affect most people and the caps could decrease if interest rates rise.
Employers with more than 10 workers and has been in business for more than two years would be required to develop and automatically enroll employees in IRAs. Payroll deductions would control the contributions and employees would have to decide how much would be taken out with a default contribution set at 3%. The President\’s proposal would create access to retirement plans for more people and give tax credits to employers who implement the plan. Many small businesses see it as one more burden to comply with.
Depending on which side of the line you stand, these potential plans may be a winning solution or a losing one. As with the each of the plans listed above, they target a small percentage of tax payers. The President\’s plan to earn tax revenue off retirement accounts is not a blanket plan, but rather an approach to collect additional tax money from certain areas of retirement planning.
If you think that you may be affected by these listed plans or others on the President\’s agenda call your CPA and find out how you can steer your financial goals in a positive way. If you are one of those employed by a small business and will now possibly have an opportunity to contribute to an IRA, your financial adviser will help you decide how much of your paycheck should be enrolled. The CPA will take under consideration your salary, your age, family size and any other important matter shared to make the most of out of the retirement savings plan opportunity.
The President has proposed other plans aside from these three listed above. Call your Certified Public Accountant today to see how you may be affected once the proposed plans become law.
CDRCPA Inc. Certified Public Accountants
is conveniently located in Murrieta, California, but our entire staff of accountants, CPA\’s and
personal or business tax service professionals
frequently visit our client\’s at their location. So, if you can\’t come to us, we\’ll certainly come to you.