Small Business4u

Hi everyone,

When I meet with people starting a small business, typically what does not get addressed is paying yourself.  It is imperative that you pay yourself!  So we put together some informtional data for you to hopefully answer some of your questions.

Joseph asked:

Q.    How much of my IRA contribution is tax deductible?

A.    It depends.  All strategies work different based on your income whether you have met the full available contribution for that year and if you and your spouse, if jointly filed, earned more in taxable compensation than the maximum deductible amount for your IRA contributions.  In most cases you will be able to deduct the full amount of your contribution up to the maximum deductible amount.

 

Richard asked:

Q.    I am leaving my company and taking my 401K proceeds.  How much time do

I have to deposit them in an IRA before they are taxed as income?

            A.  Typically you have 60 days to roll over your distribution if the money was

                  given to you.  The safest way to do this is to have the company administrator

                  write a check to the IRA rollover account directly.  This insures that nothing

                   is withheld in taxes and is a much easier and cleaner way of achieving your

                   transition.

 

Gabriel asked:

Q.    Can I have multiple IRA accounts at different institutions?

A.    Yes.

 

Thomas asked:

Q.    What is the fee structure associated wit IRA’s?

A.    First of all it is important to understand that there are variable products and traditional products available.  Most traditional products charge no fee and are a more secure avenue of attaining your goals.  Variable accounts on the other hand can vary from ten to sixty dollars per fund.  They each offer different services and benefits and you should consult with your financial advisor for the best plan of action. 

 

Jesse asked:

Q.    If I have an IRA in a brokerage account can I sell the stock in my brokerage account and immediately invest it into my traditional IRA account?    

A.    You can not mix a non IRA brokerage account with an IRA account without creating tax ramifications.  (By law this is considered self dealing and would not be allowed.)

 

Ashley asked:

Q.    What happens if I contribute too much to my IRA?

A.    Typically you would need to with drawl some or all of the money from the plan or reallocate it to next year contributions.  In this situation, the tax payer has until the due date for filing their tax returns. Not including any extensions to with drawl the excess contributions plus any income generated by the excess contributions. 

 

Billy asked:

Q.    What are the implications for my estate if I leave my investments in my IRA?

A.    IRA accounts can be rolled over to a spouse with no immediate income taxation or to the descendent, the estate, or the spousal beneficiary.  However, if there is no surviving spouse or when the surviving spouse dies still owning the IRA assets these assets are typically highly taxed.  Proper planning for your estate with life insurance a consulting with your financial advisor on a frequent basis will generally help you avoid these potential problems.

 

Theresa asked:

Q.    What type of investment can be used as an IRA?

A.    Almost all investments are technically eligible for inclusion in an IRA account.  Most commonly people will link their IRA to some form of an Annuity avoiding probate tax and broadening the spectrum of the potential investment options.

 

David asked:

Q.    Is Gold an eligible purchase inside an IRA?

A.    Yes.  This is a very excellent question. This is a popular form of investing in today’s unstable market.    

 

Randy asked:

Q.    How do I decide which IRA is right for me?

A.    It depends on your taxable income, your age and your family status. It is best to let your financial advisor do a thorough analysis of your situation and they will best be able to guide you in the direction that will help you achieve your goals.

 

Danny asked:

Q.    How do I sign up for an IRA?

A.    Only certain organizations can open an IRA for you.  They are called trustees or custodians.  The IRS may approve certain financial institutions, brokerage firms or insurance companies to act as a trustee or custodian for IRA’s.  I would recommend you seek out an independent brokerage.  Most reputable brokerages do not charge an in house fee because they are compensated directly from the trustee or custodian that they place you with.  More importantly they are not representing one trustee but several and will be able to offer you a variety of options not just one vehicle that could limit your potential for greater success.

 

Gretchen asked:

Q.    Can I donate my IRA to a charity or as a gift?

A.    The best way is to name the charity as the beneficiary of your IRA.  This will help avoid a heavy tax burden when you take money out while still alive.  Keeping in mind if you donate any monies prior to age 59 ½ you will still incur a 10% early penalty.

 

Wade asked:

Q.    Can I borrow funds from my IRA? 

A.  No, but if properly set up with the right trustee most companies will allow you to take a 10% penalty fee with drawl on an annual basis.

 

 

Q.     What is an IRA?

A.      An IRA is an INDIVIDUAL RETIREMENT ACCOUNT.  An IRA is a personal savings and investment plan that provides substantial tax advantages to individuals saving money for long term retirement purposes.

 

Q.    How does an IRA work?

A.    You invest money into an IRA up to the allowable amounts under tax law (consult your financial advisor for consumer limitations).  These investments are termed “contributions”.  In most instances tax deductions are available each year in which funds are contributed.  All contributions as well as earnings and gains accumulate tax free until you withdraw money from the account, therefore allowing you to generate substantial additional earnings.  To avoid any unnecessary taxation of the value of your IRA, distributions should never be taken before the age of 59 ½.  In addition the government can tax your IRA no later than April 1^st of the following date that you attain age 70 ½.

Q.    How many different types of IRA’s are available?

A.    There are five. 

1.      Traditional IRA

2.      Education IRA

3.      SEP IRA

4.      Simple IRA

5.      Roth

Q.    Who is eligible to open an IRA?

A.      Any individual can make contributions to a traditional IRA as long as you or your spouse have received taxable earned compensation during the year and were not over the age of 70 ½ . (Considering the strong differences between IRA’s you should always consult your financial advisor for the strategy that will be best for you.

Q.    What are the contribution limits to IRA’s?

A.    It all depends on which type of IRA you select.  Maximum contributions can typically be made through the avenue of a SEP IRA and traditionally the lower contribution amounts would be made through a Roth IRA. In addition after 2006 most IRA’s were set to be indexed to inflation.  Meaning limits will continue to increase for years to come/

 

I hope you found this information informative.  More in a later blog.