Catherine M. Censullo CPA
One Minute Tax Tip
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DID YOU KNOW THAT IRAs ARE SUBJECT TO TAXES AND PENALTIES THAT ARE DIFFERENT FROM ALL OTHER ASSETS?
Back in August, in Part I of this series, I spoke with you about the beneficiary aspects of IRA accounts. Today, I will speak with you about how your IRAs are different when it comes to taxes and penalties.
When you are working on planning your legacy, and your estate includes IRA assets, you need to know that IRAs are distributed differently than all other assets while you are alive and after you die.
Here are some of the things you should consider when you are setting up your plan:
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Your traditional IRAs have required minimum distributions once you reach age 70 1/2.
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Your IRAs have their own set of complex distribution rules, both during your life and after your death.
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Your IRA distributions can incur tax penalties. If you make a mistake, it can be extremely costly.
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Your IRAs are highly taxed upon your death or withdrawal.
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Your IRA investment gains receive no preferential capital gains tax rates. Your distributions are taxed as ordinary income.
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Your IRAs are subject to double taxation at death, for both estate tax and income tax.
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Your IRAs receive no step-up in basis upon death.
With all these special rules, you need to look at your IRA assets differently from your other assets. If you don't plan properly, the government's share can be much higher than you expected.
Maybe it's time to rethink your plan. If you are wondering how these changes might affect you, please do not hesitate to call the office at 914-997-7724 and set up an appointment.
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Catherine M. Censullo, CPA
914.997.7724
catherine.censullo@cmcensullocpa.com
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