Don’t overlook the following two deadlines this month if they apply to you:
* The second quarterly payment of estimated income tax for 2014 is due on June 16.
* If you have foreign bank, savings, or investment accounts that exceeded $10,000 in 2013, you are required to file “Treasury Department Form 114″ by June 30, 2014.
Form 114 is new this year, replacing the prior Form 90-22.1. This report is not a form that you file with your income tax return. Rather, it is a separate form that must be filed electronically with the Treasury Department in Detroit. The report must be received by the Treasury Department by the June 30 due date. No filing extension is available. Penalties for failing to meet this filing requirement are severe and can include jail time.
Contact our office if you need details about these requirements or filing assistance.
These days we need to do all we can to boost our retirement savings, and tax breaks can be a big help. Using a traditional IRA to build your nest egg is a great idea. Just be sure you don’t make any of these common IRA mistakes.
THE WRONG INVESTMENTS. Don’t put tax-free investments, such as municipal bonds, in an IRA. You’ll end up paying ordinary income tax on money that wouldn’t have been taxed, or you’ll sacrifice earnings for a tax benefit you’ll never receive.
NO CATCH-UP CONTRIBUTIONS. Be aware that if you’re 50 or older, you can contribute an extra $1,000 to your IRA each year.
THE WRONG BENEFICIARY. Your choice of beneficiary can affect how quickly IRA funds must be distributed. The longer money stays in an IRA, the longer it grows tax-free.
EARLY WITHDRAWALS. You’ll pay regular income tax as well as a 10% federal penalty and a 2.5% state penalty on early withdrawals from your IRA unless an exception applies. Early withdrawals are those you take when you’re under age 59½.
MISSED RMDs. You are required to take distributions from your IRA when you reach 70½. You have until April 1 of the year after you turn 70½ to begin withdrawals. The penalty for withdrawing less than the required amount is 50% of the shortage.
IRA mistakes can be costly. If you’d like answers to your IRA questions, give us a call.