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IRS to Crack Down on IRA Tax Rules
- January 27th, 2015
(Article originally written 2012)
If you have an individual retirement account (IRA), now is the time to make sure you have been complying with tax rules. The Internal Revenue Service (IRS) is going to start cracking down on individual retirement accounts in an effort to collect penalties from taxpayers who do not follow rules regarding maximum contributions and minimum distributions. According to a June 22, 2012, article in the Wall Street Journal, the crackdown is part of an attempt to collect millions of dollars in previously uncollected penalties.
Local Elder Law Attorneys in Ashburn, VA
Farr Law Firm
In practice since 1987, Fairfax Attorney Evan Farr is widely recognized as one of the leading Elder Law, Estate Planning, and Specials Needs attorneys in Virginia and one of foremost experts in the Country in the field of Medicaid Asset Protection and related Trusts. Evan Farr has been quoted or cited as an expert by n...
The Estate Planning & Elder Law Firm PC
Bill founded The Estate Planning & Elder Law Firm, P.C. in 1994. Bill limits his practice to the areas of estate planning and administration, incapacity planning, Medicaid, asset protection planning, and elder law. He is one of (15) fifteen attorneys practicing in Virginia, Maryland and the District of Columbia, ce...
Hale Ball Carlson Baumgartner Murphy PLC
Jean Galloway Ball is certified in Elder Law by the National Elder Law Foundation. She is a 1977 honors graduate of the National Law Center, George Washington University, and she did her undergraduate work at the University of California at Berkeley, graduating Phi Beta Kappa in 1971. She is admitted to practice in Vir...
Individuals are only allowed to contribute a certain amount to regular and Roth IRAs each year. For 2014 and 2015, you can contribute the lesser of $5,500 or your taxable compensation for the year, plus an addition $1,000 if you are over age 50. If you contributed more than is allowed, you may have to pay a penalty of 6 percent of the excess amount. In addition, once you reach age 70½, you are required to start taking distributions from your IRA. If you don't take the required minimum distribution, you can be subject to a 50 percent penalty on the amount you should have withdrawn. The same penalty applies to inherited IRAs. There is no statute of limitations on the penalties, so if errors are made over subsequent years, the penalties can add up quickly.
It is unclear how the IRS will step up enforcement of the penalties. The IRS will report to the Treasury Department on October 15th on its strategies, which could include more paperwork and audits. According to the Wall Street Journal, in 2006 and 2007, the IRS failed to collect $286 million in penalties for missed withdrawals and contributions.
Individuals and financial planners need to look over their IRAs to make sure contributions and withdrawals have been made properly. If you have any errors, you should correct them immediately because delaying further only increases penalty and interest charges.
For more information from the Wall Street Journal, click here.
Last Modified: 01/27/2015