CPA Blog

Unexpected retirement plan disqualification can trigger serious tax problems

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Published: Tuesday, 17 May 2016 08:50

Written by Phillip Strickler, CPA.CITP

It’s not unusual for the IRS to conduct audits of qualified employee benefit plans, including 401(k)s. Plan sponsors are expected to stay in compliance with numerous, frequently changing federal laws and regulations.

For example, have you identified all employees eligible for your 401(k) plan and given them the opportunity to make deferral elections? Are employee contributions limited to the amounts allowed under tax law for the calendar year? Does your 401(k) plan pass nondiscrimination tests? Traditional 401(k) plans must be regularly tested to ensure that the contributions don’t discriminate in favor of highly compensated employees.

If the IRS uncovers compliance errors and the plan sponsor doesn’t fix them, the plan could be disqualified.

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Why it’s time to start tax planning for 2016

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Published: Tuesday, 10 May 2016 10:22

Written by Phillip Strickler, CPA.CITP

Now that the April 18 income tax filing deadline has passed, it may be tempting to set aside any thought of taxes until year end is approaching. But don’t succumb. For maximum tax savings, now is the time to start tax planning for 2016.

More opportunities

A tremendous number of variables affect your overall tax liability for the year. Starting to look at these variables early in the year can give you more opportunities to reduce your 2016 tax bill.

For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year-end activity.

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Why it’s a good idea for employers to encourage 401(k) rollovers

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Published: Friday, 22 April 2016 14:36

Written by Phillip Strickler, CPA.CITP

Many people collect “orphan” 401(k) plan balances as they move from job to job. Why should employers care? Helping new employees roll over their accounts from former employers can be beneficial for both parties. The same is true of assisting former participants (who have left your business).

Current employees

One reason participants orphan their previous employers’ plans is that the process of rolling over an old 401(k) plan balance to a new employer’s plan can be cumbersome. Unfortunately, many employees fail to properly manage their accounts even when they have only one, let alone two or three. If you have employees in this situation, counseling them on the benefits of consolidating their accounts can help improve their retirement planning while boosting morale and engagement.

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What 2015 tax records can you toss once you’ve filed your return?

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Published: Wednesday, 13 April 2016 11:47

Written by Phillip Strickler, CPA.CITP

The short answer is: none. You need to hold on to all of your 2015 tax records for now. But this is a great time to take a look at your records for previous tax years and determine what you can purge.

The 3-year rule

At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss most records related to tax returns for 2012 and earlier years.

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