News
Why You Should Boost Your 401(k) Contribution Rate Between Now and Year End
One important step to both reducing taxes and saving for retirement is to contribute to a tax-advantaged retirement plan. If your employer offers a 401(k) plan, contributing to that is likely your best first step.
If you’re not already contributing the maximum allowed, consider increasing your contribution rate between now and year end. Because of tax-deferred compounding (tax-free in the case of Roth accounts), boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement.
Traditional 401(k)
A traditional 401(k) offers many benefits:
• Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
• Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
• Your employer may match some or all of your contributions pretax.
For 2017, you can contribute up to $18,000. So if your current contribution rate will leave you short of the limit, try to increase your contribution rate through the end of the year to get as close to that limit as you can afford. Keep in mind that your paycheck will be reduced by less than the dollar amount of the contribution, because the contributions are pre-tax so income tax isn’t withheld.
If you’ll be age 50 or older by December 31, you can also make “catch-up” contributions (up to $6,000 for 2017). So if you didn’t contribute much when you were younger, this may allow you to partially make up for lost time. Even if you did make significant contributions before age 50, catch-up contributions can still be beneficial, allowing you to further leverage the power of tax-deferred compounding.
Roth 401(k)
Employers can include a Roth option in their 401(k) plans. If your plan offers this, you can designate some or all of your contribution as Roth contributions. While such contributions don’t reduce your current MAGI, qualified distributions will be tax-free.
Roth 401(k) contributions may be especially beneficial for higher-income earners, because they don’t have the option to contribute to a Roth IRA. On the other hand, if you expect your tax rate to be lower in retirement, you may be better off sticking with traditional 401(k) contributions.
Finally, keep in mind that any employer matches to Roth 401(k) contributions will be pretax and go into your traditional 401(k) account.
How much and which type
Have questions about how much to contribute or the best mix between traditional and Roth contributions? Contact us. We’d be pleased to discuss the tax and retirement-saving considerations with you.
© 2017
2017 OMGMA Conference Recap
Thank you for joining us at the OMGMA fall conference last week. It was one of the best Healthcare conferences our team has attended, with powerful keynote speakers and sessions. We had a tremendous turn out for our own session, presented by Brian Newton, CPA and Jeremy Prickel, CPA.
It was great to see so many of our clients and congratulations to the winner of our gift basket and our $100 Amazon gift card!
We received excellent feedback from everyone on our upcoming webinar series. We hope you are able to join us at our upcoming healthcare webinar scheduled for this Friday September 22nd.
To register: Healthcare Webinar: Top 7 Strategies for Successful Billing and Collections
We look forward to seeing you at the next conference!
2017 Q4 Tax Calendar: Key Deadlines for Businesses and Other Employers
Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
October 16
• If a calendar-year C corporation that filed an automatic six-month extension:
o File a 2016 income tax return (Form 1120) and pay any tax, interest and penalties due.
o Make contributions for 2016 to certain employer-sponsored retirement plans.
October 31
• Report income tax withholding and FICA taxes for third quarter 2017 (Form 941) and pay any tax due. (See exception below.)
November 13
• Report income tax withholding and FICA taxes for third quarter 2017 (Form 941), if you deposited on time and in full all of the associated taxes due.
December 15
• If a calendar-year C corporation, pay the fourth installment of 2017 estimated income taxes.
© 2017
Watch Out For Potential Tax Pitfalls of Donating Real Estate to Charity
Charitable giving allows you to help an organization you care about and, in most cases, enjoy a valuable income tax deduction. If you’re considering a large gift, a non-cash donation such as appreciated real estate can provide additional benefits. For example, if you’ve held the property for more than one year, you generally will be able to deduct its full fair market value and avoid any capital gains tax you’d owe if you sold the property.
There are, however, potential tax pitfalls you must watch out for:
Donation to a private foundation. While real estate donations to a public charity generally can be deducted at the property’s fair market value, your deduction for such a donation to a private foundation is limited to the lower of fair market value or your cost basis in the property.
Property subject to a mortgage. In this case, you may recognize taxable income for all or a portion of the loan’s value. And charities might not accept mortgaged property because it may trigger unrelated business income tax. For these reasons, it’s a good idea to pay off the mortgage before you donate the property or ask the lender to accept another property as collateral for the loan.
Failure to properly substantiate your donation. This can result in loss of the deduction and overvaluation penalties. Generally, real estate donations require a qualified appraisal. You’ll also need to complete Form 8283, “Non-cash Charitable Contributions,” have your appraiser sign it and file it with your federal tax return. If the property is valued at more than $500,000, you’ll generally need to include the appraisal report as well.
Sale of the property within three years. The charity must report the sale to the IRS, and if the price is substantially less than the amount you claimed as a tax deduction, the IRS may challenge your deduction. To avoid this result, be sure your initial appraisal is accurate and well documented.
Sale of the property to someone related to you. If the charity sells the property you donated to your relative (or to someone with whom you negotiated a potential sale), the IRS may argue that the sale was prearranged and tax you on any capital gain.
If you’re considering a real estate donation, plan carefully and contact us for help ensuring that you avoid these pitfalls.
© 2017
Events
Quick Links
SafeSend
Intacct Client Login
Plan Sponsor Link
Payroll Portal
Forms & Guides
Our Approach
Founded on a commitment to make a positive impact in the lives of our clients, employees, and the community, we help organizations and individuals achieve financial success.
We Make it Easy
Accounting law and compliance can be complicated, but working with your accountant and advisor shouldn’t be. We’ll help you determine your needs and reach your goals.
One of Oregon's Largest Firms
We started small in 1946, but today we’re one of Oregon’s largest CPA & Advisory firms with a reputation for having a trustworthy team of highly-skilled CPAs, Advisors, and specialists.