Overview

The Financial Crimes Enforcement Network (FinCEN) reports that over 6.5 million reporting companies have now completed their beneficial ownership information reporting obligations.  However, FinCEN estimates that about 32 million companies are actually required to report.  That means the number of compliant companies is much lower...

As a reminder for clients as we approach the busy holiday season, clients who are interested in executing a Roth conversion must first take all RMDs for the year. This rule was included in the final RMD regulations released by the IRS earlier in 2024....

The IRS issued a snapshot addressing certain audit and compliance issues about qualified plan investments in third-party loans. Qualified retirement plans are not explicitly prohibited from investing in third-party loans. The IRS snapshot reminds taxpayers that the plan may not lend money to disqualified persons...

For 2025, the ACA affordability threshold was increased from 8.39% to 9.02%–meaning that employer-sponsored coverage will only be deemed affordable if the employee’s required contribution for self-only coverage does not exceed 9.02% of the employee’s household income. Now, the IRS has announced a decrease in...

The SECURE Act now allows penalty-free withdrawals to cover expenses related to the birth or adoption of a child.  The SECURE Act 2.0 also contained many provisions that expanded taxpayers' ability to access retirement funds without penalty.  One new provision will allow taxpayers to withdraw up to $2,500 each year to cover the costs of long-term care insurance without triggering the 10 percent early withdrawal penalty.  Beginning in 2024, plan participants will be entitled to take penalty-free withdrawals if the participant certifies that they have been a victim of domestic violence by a spouse or domestic partner within the one-year period prior to the withdrawal.  Taxpayers who have been certified by a physician as being terminally ill are also now permitted to take penalty-free withdrawals.<br /> <br /> We asked two professors and authors of ALM’s <em>Tax Facts </em>with opposing political viewpoints to share their opinions about expanding the hardship distribution rules to allow for penalty-free distributions for different reasons.<br /> <br /> Below is a summary of the debate that ensued between the two professors.<br /> <br /> <strong>Their Votes:</strong><br /> <br /> <img class="alignnone size-medium wp-image-62919" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/BloinkThumbsUp-300x105.png" alt="" width="300" height="105" /><br /> <br /> <img class="alignnone size-medium wp-image-62921" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/ByrnesThumbsDown-300x105.png" alt="" width="300" height="105" /><br /> <br /> <strong>Their Reasons:</strong><br /> <br /> <strong>Bloink:</strong> One of the primary reasons that Americans fail to take advantage of tax-preferred retirement savings options is the fear of needing the funds prior to retirement and incurring penalties on top of ordinary income tax rates for hardship withdrawals.  Expanding the limited list of reasons why a participant can access retirement funds without penalty is key to encouraging increased retirement savings.<br /> <br /> <strong>Byrnes:</strong> Expanding the hardship distribution rules only serves to encourage leakage from these retirement plans.  The early withdrawal penalties exist for a very good reason.  If retirement accounts are simply treated as any other type of savings account, taxpayers are given a powerful tax break without the strong incentive to allow those funds to remain in the retirement account.<br /> <br /> _______________________________<br /> <br /> <strong>Bloink:</strong> The list of reasons for penalty-free retirement distributions is not endless--and participants are required to certify their legitimate need for the funds.  That provides built-in safeguards.  Further, distributions are never tax-free.  We’re only talking about allowing taxpayers to access their own hard-earned funds for legitimate hardship-based reasons.<br /> <br /> <strong>Byrnes:</strong> Plans that allow hardship distributions may now rely on the employee’s certification as to the existence of the hardship and the amount needed.  That essentially means that employees can access their tax-preferred retirement funds for any reason whatsoever.  This is not how tax-preferred retirement accounts are meant to function.<br /> <br /> _______________________________<br /> <br /> <strong>Bloink:</strong> Without these types of hardship expansions, lower-income taxpayers are much less likely to adequately save to fund retirement.  Essentially, this is a type of compromise.  In the end, expanding the explicitly stated reasons for hardship distributions narrows the field and allows employers to provide clear limits on the reasons that penalty-free distributions will be permitted.<br /> <br /> <strong>Byrnes:</strong> Pre-SECURE Act, we already had a list of legitimate reasons for penalty-free withdrawals prior to retirement.  Any expansion does more harm than good in that it gives participants legitimized reasons to drain their retirement savings--and retirement saving is something that we should be trying to increase, which is why the early withdrawal penalty taxes exist in the first place.

by Prof. Robert Bloink and Prof. William H. Byrnes<br /> <br /> With each passing year, the American workforce has become more mobile. While employer-sponsored 401(k) plans are now an incredibly common employment benefit, it’s also incredibly common for employees to move between jobs with increasing frequency. These factors...

<div class="Section1">A QSST is a trust in which: (1) there is only one current income beneficiary (who must be a citizen or resident of the U.S.), (2) all income must be distributed currently, and (3) corpus may not be distributed to anyone else during the life of such beneficiary. The income interest must terminate upon the earlier of the beneficiary’s death or termination of the trust, and if the trust terminates during the lifetime of the income beneficiary, all trust assets must be distributed to that beneficiary. The beneficiary must make an election for the trust to be treated as a QSST.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 1361(d).<br /> <br /> </div>

The IRS has released the 2025 inflation-adjusted numbers for health FSAs, qualified small employer HRAs (QSEHRAs), long-term care insurance and other valuable benefits. For 2025, the contribution limit for health FSAs will increase from $3,200 to $3,300. The carryover limit will increase from $640 in...

The U.S. Supreme Court has agreed to determine the appropriate pleading standard that will apply in litigation involving the prohibited transactions rules. By way of background, the prohibited transaction rules prevent plan fiduciaries from transacting with certain interested parties unless a prohibited transaction exemption applies....

As unbelievable as it sounds, we're now approaching the busy year-end holiday season. At the same time, IRA owners should be advised about some valuable – and often required – year-end action items for their IRAs. First and foremost, taxpayers who reached age 74 or...