If you are a federal employee with outstanding tax debts, you may find that money from your TSP account (Thrift Savings Plan) is garnished to make good on those debts.

The Federal Retirement Thrift Investment Board (FRTIB) issued a final rule on September 10 in the Federal Register that makes TSP accounts (Thrift Savings Plan accounts)subject to federal tax levies.

While this new rule might seem insignificant, the IRS has recently reported that collectively, federal workers owe $3.3 billion in back taxes. This new rule may help to collect some of that money.

TSP accounts will be frozen after the TSP (Thrift Savings Plan)  receives a qualifying tax levy or criminal restitution order. After the participant’s account is frozen, no withdrawal or loan disbursements will be allowed until the account is unfrozen. All other account activity will be permitted, including contributions, loan repayments, adjustments, contribution allocations and interfund transfers. Once a disbursement from the account is made in accordance with the restitution order or levy, the hold will be removed from the participant’s account.

Required minimum distributions (RMDs) are amounts you are required to take from qualified retirement plans and IRAs in order to avoid a 50% penalty on insufficient annual distributions.

Here are 5 things to know:

 1. If you turned 70 1/2 in 2013, for example, you must take your first RMDs before the end of this year unless you postpone it until April 1, 2014.  However, postponement means taking two RMDs in 2014 and that can adversely impact taxation of Social Security benefits in 2013 and result in increased Medicare premiums for Parts B and D in 2015.

2.  If you are still working, you can postpone your RMDs from company retirement plans until you retire; this rule does not apply to IRAs.

3.  RMDs for IRAs can be taken from one or more accounts. Total up all IRAs and then decide from which one or more accounts to take the required distribution amount. This rule does not apply to qualified retirement plans; separate RMDs are required from each type of retirement plan.

4.  No lifetime distributions are required from Roth IRAs for the owner, but beneficiaries usually must draw down the accounts over their lifetime (a special rule applies to spouses).

5.  The penalty for insufficient withdrawals can be waived if you ask the IRS to do so. You must explain why you failed to take RMDs and show that you remedied the situation as soon as you discovered the insufficiency.









Stanek Tax Services · 15701 State Road 50 Ste 204 · Clermont,
FL 34711


Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail:
jay@stanektax.com


 

8/29/2013

 Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples 

WASHINGTON
  --
The U.S.  Department of the Treasury and the Internal Revenue Service (IRS) today ruled  that same-sex couples, legally married in jurisdictions that recognize their  marriages, will be treated as married for federal tax purposes. The ruling  applies regardless of whether the couple lives in a jurisdiction that recognizes  same-sex marriage or a jurisdiction that does not recognize same-sex marriage. 

The ruling implements federal tax aspects of the June 26th Supreme Court decision invalidating a key provision of the 1996 Defense of  Marriage Act.


“Today’s ruling provides certainty and clear, coherent tax filing  guidance for all legally married same-sex couples nationwide. It provides access  to benefits, responsibilities and protections under federal tax law that
all  Americans deserve,” said Secretary Jacob J. Lew. “This ruling also assures  legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”

Under the ruling, same sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including
  filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the  District of Columbia, a U.S. territory, or a foreign country will be covered by  the ruling. However, the ruling does not apply to registered domestic  partnerships, civil unions, or similar formal relationships recognized under  state law. 

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status.

Individuals who were in same-sex marriages may, but are not required to,  file original or amended returns choosing to be treated as married for federal  tax purposes for one or more prior tax years still open under the statute of  limitations.  


Generally, the statute of limitations for filing a refund claim is three  years from the date the return was filed or two years from the date the tax was  paid, whichever is later. As a result, refund claims can still be filed
for tax  years 2010, 2011, and 2012. Some taxpayers may have special circumstances (such  as signing an agreement with the IRS to keep the statute of limitations open)  that permit them to file refund claims for tax years 2009 and earlier. 

Additionally, employees who purchased same-sex spouse  health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.


How to File a Claim for Refund

Taxpayers who wish to file a refund claim  for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.

Taxpayers who wish to file a refund claim  for gift or estate taxes should file Form 843, Claim for Refund and Request  for Abatement. 

For information on filing an amended return, go to Tax  Topic 308, Amended Returns at http://www.irs.gov/taxtopics/tc308.html or the Instructions to Forms 1040X and 843.  Information on where to file your amended returns is available in the instructions to the form.    

Future  Guidance

Treasury and the IRS intend to issue  streamlined procedures for employers who wish to file refund claims for payroll  taxes paid on previously-taxed health insurance and fringe benefits provided to  same-sex
spouses. Treasury and IRS also intend to issue further guidance on  cafeteria plans and on how qualified retirement plans and other tax-favored  arrangements should treat same-sex spouses for periods before the effective date  of this Revenue Ruling.

Your 401(k) plan may allow you to borrow from the plan. However, you should consider a few things before taking a loan from your 401(k). 

If you don’t repay the full amount of the loan, including interest, according to the loan’s terms, the unpaid loan amount is a distribution to you from the plan. Your plan may even require you to repay the remaining amount of the loan in full if you stop working for the employer sponsoring the plan. Otherwise, the unpaid amount is considered a plan distribution to you.

Generally, you have to include any previously untaxed amount of the distribution in your gross income for the year in which the distribution occurs. You may also have to pay an additional 10 percent tax on the amount of the taxable distribution, unless you: 

   Are age 59 1/2 or older, or
   qualify for another exception to the 10 percent additional tax penalty.
 　
Any unpaid loan amount also means you will have less money saved for your retirement.

Remember, your 401(k) plan is designed so you can save money while working for your retirement. So, before borrowing from your future, carefully consider all other alternatives. __________________________________________________________________________________________ 

Required minimum distributions (RMDs) are amounts you are required to take from qualified retirement plans and IRAs in order to avoid a 50% penalty on insufficient annual distributions.

Here are 5 things to know:

 1. If you turned 70 1/2 in 2012, for example, you must take your first RMDs before the end of this year unless you postpone it until April 1, 2013.  However, postponement means taking two RMDs in 2013 and that can adversely impact taxation of Social Security benefits in 2013 and result in increased Medicare premiums for Parts B and D in 2015.

2.  If you are still working, you can postpone your RMDs from company retirement plans until you retire; this rule does not apply to IRAs.

3.  RMDs for IRAs can be taken from one or more accounts. Total up all IRAs and then decide from which one or more accounts to take the required distribution amount. This rule does not apply to qualified retirement plans; separate RMDs are required from each type of retirement plan.

4.  No lifetime distributions are required from Roth IRAs for the owner, but beneficiaries usually must draw down the accounts over their lifetime (a special rule applies to spouses).

5.  The penalty for insufficient withdrawals can be waived if you ask the IRS to do so. You must explain why you failed to take RMDs and show that you remedied the situation as soon as you discovered the insufficiency.