Navigating state taxes on retirement income is a critical aspect of financial planning for retirees. While federal tax rules apply uniformly across the country, state tax rules can vary widely. As an accountant, understanding state tax considerations for various sources of retirement income — including pensions, Social Security benefits, 401(k) and IRA distributions, Thrift Savings Plans (TSPs), and military retirement income — is crucial in helping your clients minimize their tax liability and make the most of their golden years. In this post, we’ll explore some hot topics on state-specific r ..read more

When filing tax returns, it’s important to report all income sources accurately. For accountants, you must also remind your clients that early distributions from qualified retirement plans or other tax-favored accounts may incur penalties and trigger the need to file Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Let’s look at what this form is all about and how to advise clients who may need to file it. Jump to: • What is Form 5329? • What are Form 5329 exceptions? • What is a Form 5329 waiver of penalty? • How to report e ..read more

When it comes to navigating the tax landscape of 401(k) contributions and withdrawals, it’s important for accountants to stay informed and help clients make tax-efficient decisions during their retirement years. Let’s take a look at some commonly asked questions and answers on 401(k) tax considerations for contributions and withdrawals. Jump to: Is a 401(k) pre-tax? Is there a 401(k) inheritance tax? How is a 401(k) taxed? Is there a 401(k) loan tax? What are some 401(k) tax benefits? How to engage with clients on 401(k) tax considerations What are the taxes on 401(k) withdrawa ..read more

As an accountant, advising your clients on retirement income taxes and related strategies can help them to optimize their financial planning in their golden years. That’s why it’s important to have a thorough understanding of the tax implications, contribution limits, and distribution rules associated with various retirement accounts, including 401(k)s, IRAs (Traditional and Roth), and pension plans. Let’s take a look at some commonly asked questions on retirement income taxes and how your firm can best advise clients as they approach their retirement years. Jump to: • 10 tax-efficient reti ..read more

QUESTION: We are required to file Form 5500 for several of our company’s employee benefit plans, and we are not sure that we will be able to file all of them on time. What do we need to do to get an extension? ANSWER: An extension for filing Form 5500 (Annual Return/Report of Employee Benefit Plan) is obtained by filing Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) on or before the regular Form 5500 due date, which is seven months after the end of the plan year. Filing Form 5558 will extend the due date to 2-1/2 months beyond the regular deadline ..read more

Tolomeo v. R.R. Donnelley & Sons, Inc., 2023 WL 3455301 (N.D. Ill. 2023) Participants in a “mega” 401(k) plan (i.e., a plan with over $500 million in assets) brought this lawsuit claiming that their employer and plan benefits committee breached their fiduciary duty of prudence by allowing the plan to pay excessive bundled recordkeeping and administrative fees, and that the employer and its board of directors breached their duty to monitor those fees. The court denied the employer’s motion to dismiss the case under the Seventh Circuit’s “newly formulated pleading standard” for t ..read more

IRS Notice 2023-43 (May 25, 2023) Available at https://www.irs.gov/pub/irs-drop/n-23-43.pdf The IRS has issued Notice 2023-43, providing interim guidance on the expanded self-correction program under the Employee Plans Compliance Resolution System (EPCRS). As background, the SECURE 2.0 Act made sweeping changes to self-correction under EPCRS (see our Checkpoint article). While the changes technically took effect December 29, 2022, the extent to which the SECURE 2.0 Act changes plans’ current self-correction options is uncertain because the new law also grants the IRS cons ..read more

Form 8915-F (Qualified Disaster Retirement Plan Distributions and Repayments) and Instructions (Rev. Jan. 2023) Form Instructions The IRS has issued revised Form 8915-F and Instructions for individual taxpayers to report retirement plan distributions due to qualified disasters and repayments of disaster distributions. Form 8915-F is a “forever form,” designed to be used for distributions for qualified 2020, 2021, and later disasters, and for each year of reporting income from and repayment of those distributions (see our Checkpoint article). The revised Form 8915-F reflects several changes in ..read more

QUESTION: Due to the COVID-19 emergency, we have been required to extend deadlines for participants and beneficiaries to submit claims and appeals under our employee benefit plans. How does the end of the COVID-19 national emergency affect these extensions? ANSWER: Various plan-related deadlines have been extended—but for no longer than one year—by disregarding (tolling) the COVID-19 “outbreak period,” which ends 60 days after the end of the national emergency unless another end date is announced by the agencies (see our Checkpoint article). The COVID-19 national emergency ended on April ..read more

Hughes v. Northwestern University, 63 F.4th 615, 2023 WL 2607921 (7th Cir. 2023) Available at http://media.ca7.uscourts.gov/cgi-bin/OpinionsWeb/processWebInputExternal.pl?Submit=Display&Path=Y2023/D03-23/C:18-2569:J:Brennan:aut:T:fnOp:N:3020799:S:0 On remand from the U.S. Supreme Court (see our Checkpoint article), the Seventh Circuit Court of Appeals reexamined defined contribution plan participants’ allegations that the plan’s fiduciaries had breached ERISA’s duty of prudence by (1) failing to monitor and incurring excessive recordkeeping fees (in part due to revenue shari ..read more