BE SURE YOU UNDERSTAND ALL THE TAX RULES.
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Tax Tips on Making IRA Contributions
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If you made IRA contributions or you’re thinking of making them, you may have questions about IRAs and your taxes. Here are some important tips from the IRS about saving for retirement using an IRA.

1. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

2. You must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If you’re married and file a joint return, generally only one spouse needs to have compensation.

3. You can contribute to an IRA at any time during the year. To count for 2013, you must make all contributions by the due date of your tax return. This does not include extensions. That means you usually must contribute by April 15, 2014. If you contribute between Jan. 1 and April 15, make sure your plan sponsor actually applies your investment payment it to the right year that you wanted it to be applied. Keep all the investment paperwork and broker instructions to prove your agreement with your IRA sponsor for every transaction. It might come in handy someday.
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Watch “Understanding Individual Retirement Accounts – IRA…” on RexTube.


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4. In general, the most you can contribute to your IRA for 2013 is the smaller of either your taxable compensation for the year or $5,500.
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If you were age 50 or older at the end of 2013, the maximum you can contribute increases to $6,500.
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Watch: Who inherits my Individual Retirement Account IRA on RexTube.

http://youtu.be/ag6aytn2yjQ
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5. You normally will not pay income tax on funds in your traditional IRA until you start taking distributions from it. You must start taking regular IRA distributions after you pass the age of 70.5 years young.

WARNING:
If you do not take the Required Minimum Distribution (also called the ‘RMD’ ) every year after you pass age 70.5 the you will face huge penalties in the amount of 50% of the RMD you should have taken out as a taxable distribution each year.

6. Qualified distributions from a Roth IRA are tax-free. Qualified means:
A) That you first contributed money to this Roth IRA account a full five years before you withdrew the money out of the account and
B) You are over age 59.5 at the time of the distribution.
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You report distributions from Roth IRA accounts on IRS Form 8606, page 2.
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7. The same rules apply to a Roth IRA account that also apply to a tradional IRA account except that you can never claim a tax deduction for contributions to a Roth IRA account. The first benefit of putting money in a Roth IRA account is that you do not pay tax on the annual income earned in the account.
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Unlike a traditional IRA, you can never get a current yeat tax deduction when you make contributions to a Roth IRA account.
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Then after keeping the money in the Roth IRS longer than the five years discussed above, you dump out you little Roth IRA “piggy bank” and not pay any tax on your gains. .
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That is until Congress changes the rules. Remember you do not get a tax deduction for your payments to your Social Security Account either. And when Social Security started it was also promised that it would not be taxable because you were only getting back your own money that was never taken as a tax deduction in prior years.
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Watch “Who the heck inherits my Individual Retirement Account IRA?…” on RexTube


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8. Well the taxpayers were tricked with Social Security because a good portion is often treated as taxable income when received now days.
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9. You may be able to deduct some or all of your contributions to your traditional IRA. Use the worksheets in the Form 1040 instructions to figure the amount that you can deduct.
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. Watch “What is an IRA? Traditional IRA vs Roth IRA vs 40…” on RexTube.

A 200 video set on IRA accounts.
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http://youtu.be/xDIu7bdZuko
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10. You report penalties on IRA distributions is you mane a traditional IRA distribution before reaching age 59.5 years young.
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11. One.of the biggest financial mistakes you can make is to take a premature distribution ( before age 59.5) from an IRA or a company pension plan.
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Often the premature distribution is taken to buy a house, to pay off bills, or to cover unexpected emergencies. Big mistake.
Pension advisors frequently give tax advise in this area by saying that there is a 10% penalty for an early distribution. So the person calculates they can handle that 10% penalty. This is false logic. What really happens is first tou get the 10% penalty on IRS Form 5329. Then the State of California gives you a 2.5% penalty. Then the distribution goes into ordinary income and lets say you are in the 30% tax bracket. Then California also taxes the distribution as regular income of lets say 6% to 8%.

Where are now? Has anyone been keeping a running total of the tax.percentages for this early distribution?

Well the total loss of funds from a premature IRA or pension distribution is a loss of between 42% to 48% of every dollar you took out. Bad idea, Aye?

12. Then the money is all used up before you file your tax return. Then your tax advisor tells you that you owe more tax than you ever dreamed possible. Gee, how will you ever pay that huge tax debt off now? Your between a rock and a hard place. Don’t expect much sympathy from your friends at IRS. They will gladly garnish you paycheck and empty your bank ac ount after you have written a batch of checks and mailed them out. I guess the phrase ‘ oooops’ is too mild for this situation. yep.

13.  If you contribute to an IRA you may also qualify for the Saver’s Credit. The credit can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.

14. The Savers Credit is phased out when Adjusted Gross Income is more than $59,000. For single individuals the credit phased out when Adjusted Gross Income exceeds $29,500. These numbers are about half of the federal poverty rate. So the credit is illusory because if you qualify based on your income then you are also needing to use all your income for survival, food, clothing, shelter and transportation. Like many government programs that are touted by government talking heads but you are never going to see any benefit because it was designed for people that do not have the funds to take advantage of the Savers Credit. It is a sad legislative trick to tease the poor with immaginary benefits.

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USA ~ EAGLE & FLAG Mov Gif 04FEB14

A MESSAGE FROM REX CRANDELL’S TAX OFFICE:

Our firm provides income tax preparation and planning services for individuals, families, C Corporations, S Corporations, LLC Limited Liability Companies, Partnerships, domestic partners, for income and deductions generated in California, the United States, and assist taxpayers internationally comply with the USA income tax reporting requirements. Rex Crandell, Esq. also provides services in the area of Estate Planning, Estate Administration, Probate Procedures, Advance Healthcare Directives, Durable Powers of Attorney for Financial Management, and Advance Health Care Directives.

You can contact Rex Crandell’s offices in Walnut Creek and San Francisco, California
by calling; 1 (800) 464-6595;
or (925) 934 6320, Walnut Creek, California;  or  (415) 982-1110, San Francisco, California

or by e-mail at:    rexcrandell@astound.net

http://www.rexcrandell.com/

http://www.taxrexcrandell.com/

We would be happy to hear from you.

…FROM REX CRANDELL’s OFFICE…

Please contact our office if you have any questions.

Very truly yours,
/s/ Rex L. Crandell
Rex L. Crandell. CPA, Esq.

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FROM:

Rex L. Crandell Firm

Walnut Creek Office (For UPS/FedEx/OR if Signature Req’d Documents)
3000 Citrus Circle
Suite 207 – West Wing [ Click For MAP TO OUR OFFICE]
(925) 934-6320
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425 Market Street
22nd Floor [ Click For MAP TO OUR OFFICE]
(800) 464-6595
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E-Mail: mailto:rexcrandell@astound.net
Internet: http://www.rexcrandell.com
Internet 2nd Web http://taxrexcrandell.com
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Skype Address rex.crandell
Fax: (925) 934-6325
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All U.S. Mail items [Except if Signature is required]:
P.O. Box 30305-Dept.  Tax News Blog Update
Walnut Creek, California 94598-9305 United States of America
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IT'S TAX TIME.  BETTER GET YOUR PAPERS AND FILES READY EARLY. IT’S TAX TIME. BETTER GET YOUR PAPERS AND FILES READY.
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This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions.

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STATEMENT PURSUANT TO IRS CIRCULAR 230: The drafter of this document did not intend nor write this document for the purpose that this document would be used to avoid any penalty imposed by a taxing authority, for promoting, marketing or recommending this advice to another party. The recipient of this document may not use this document for that purpose. Rex Crandell Firm would be pleased to prepare or arrange to have prepared by legal counsel, as applicable, a document that would meet the specific requirements of IRS Circular 230 and could be used for those purposes. Please advise us if you desire such a document.

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