2015 Retirement Plan Contribution Limits

Jar with label Retirement Plan

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2015. In general, many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Here are the highlights:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit amount for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • Contribution limits for SIMPLE retirement accounts is increased from $12,000 to $12,500. The additional catch-up contribution limit amount for individuals aged 50 and over is increased from $2,500 to $3,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000 in 2014. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000 in 2014. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000. Keep in mind there is no income limit for taxpayers who are not covered by a qualified retirement plan.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The deductible contribution for Simplified Employee Pension Plans (SEPs) is $53,000, up from $52,000 in 2014.
  • The AGI limit for the saver’s credit, which also known as the retirement savings contribution credit, is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000 in 2014; and $30,500 for married individuals filing separately and for singles, up from $30,000 in 2014.

Spadea & Associates, LLC

Contact us online or at (610) 521-0604 to schedule a free consulation. At the law offices of Spadea & Associates, LLC, in Ridley Park, Pennsylvania, we represent individuals and businesses throughout southeastern Pennsylvania, including Delaware County, Montgomery County and Camden County. We also work with clients in Philadelphia and Burlington Counties.

When Does an Estate Fiduciary Income Tax Return Need to be Filed

The estate must file a 1041 fiduciary income tax return if the estate has income or property sales over $600 during the tax year. So if the executor receives a 1099 under the Estate Tax Identification Number for over $600 of interest or dividend income, or real estate is sold in a subsequent year after death, a fiduciary income tax return will have to be filed. The federal estate fiduciary 1041 income tax return is due 3½ months after the close of the tax year.

Normally, estate fiduciary returns result in “excess deductions on termination”, which can be divided equally among all the beneficiaries, and used by them as itemized deductions on their personal federal income tax returns to increase their income tax refund.

There is no income tax on inheritances except to the extent that such items represent tax deferred items such as pension plans, annuities, IRA’s, and accrued E bonds or to the extent that they represent income earned after death, there is no inheritance tax on such post-death income. Income tax on such tax deferred items is due by the beneficiaries in the year they receive the income. A final federal income tax return for your loved one must be filed, assuming he met the filing threshold which for the 2014 tax year is $11,700, excluding social security for a decedent over the age of 65. In addition, if federal income tax was withheld, you would file to get the federal income tax refund regardless of the income earned.

There is never any Pennsylvania income tax due on inherited property including tax deferred property such as pension plans, IRA’s or annuities.

If there are U.S. Savings Bonds, the significant factors are: (a) the turnover date; and (b) income tax on accrued interest. The turnover date means that since bonds increase in value every six months, there is a loss of up to five months interest if cashing is not made in one of the two months in each year in which value increases. There are three choices with respect to reporting accrued interest on Savings Bonds: (1) Report it on the decedent’s final 1040 return; if he owes no tax, even with the interest included, this is the clear choice; (2) Report it on the estate’s fiduciary 1041 return, if this is done, ensure you have sufficient estate deductions to offset against the bond interest; or (3) Transferring the bonds without cashing, which makes sense if the beneficiary is in a low tax bracket.

If you were named as a beneficiary of an Individual Retirement Account (IRA), then you should consider the possibility of electing to stretch the pay-out over your own life expectancy if the plan administrator permits it. If not then you can take distributions over 5 years or elect to withdraw the entire balance. However, you must pay federal income tax on any distributions you receive in the year received.

Real estate, like stock, takes a stepped up basis at death, so that original cost to the decedent is irrelevant for income tax purposes. If you decide to sell a house and do not need the aid of a real estate agent to find a buyer, we can handle all the paperwork from the agreement of sale to closing for an additional fee. Keep in mind if you do not sell the property within fifteen months after the date of death we must value the property using the common level ratio or based on an appraisal.

Contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604 if you need help administering an estate or find yourself being appointed as an Executor.

What Business Expenses Are Deductible?

Coffee cup and tax forms

If you are a self-employed sole proprietor or operate an LLC taxed as an S-corporation, any expense that your business incurs that is ordinary and necessary is deductible under Section 162 of the Internal Revenue Code. Therefore, list the total spent on each of the expense categories listed below:

  • Accounting, legal and professional fees;
  • Advertising;
  • Car expense – indicate total annual miles driven, then break out total annual business miles plus parking and tolls including business log with date, miles driven, business purpose and destination or
    total annual miles driven, actual fuel invoices, auto insurance, repairs and total miles driven and total annual business miles plus parking & tolls;
  • Fixed Assets – If you bought a vehicle, computer, equipment, office furniture or placed it in service during the tax year, even if you already owned it. Also provide a copy of the purchase invoice so the total cost can be expensed it under IRC Sec. 179;
  • W-3 – Salaries that your company paid to others. List officer and shareholder salary separately;
  • Employer share of employment taxes like FICA and FUTA;
  • Commissions or fees paid to other contractors. Have them fill in form W-9 if they were not incorporated so a 1099 can be issued by February 1;
  • If you already issued them a 1099, please provide the 1096 showing total independent contractors paid.
  • Professional Liability Insurance, Workmans Compensation Insurance and Health insurance;
  • Office Supplies;
  • Materials or Purchase of inventory for resale;
  • Travel, Hotel, Airfare and Car Rental;
  • Meals – keep track of date, place, person entertained and business purpose. If you do not have a digital calendar (such as Outlook or Google Calendar) then you need a receipt for everything If you have a digital calendar then you only need receipt if you pay more than $75.00;
  • Telephone including local, long distance, fax, land lines and mobile;
  • DSL, cable and internet charges;
  • Postage including shipping costs like Fed Ex and UPS;
  • Continuing education and business seminars and conferences;
  • Interest expense paid on business loans and provide year end balances;
  • Rent for office space or equipment;
  • Utilities like electricity, fuel oil, water or gas.
  • Prior year PA franchise (Capital Stock) tax from Page 2 of the PA RCT-101;
  • Prior Year Local Income Tax paid;
  • Total State sales tax paid if you included it in gross sales revenue.

Never pay any personal expenses from your business bank account. Instead take draws from your business account and transfer money to your personal account and pay the personal bills directly from your personal account. Contact Spadea & Associates, LLC at 610-521-0604, if you have any questions or need your tax returns prepared.

What Business Expenses Are Deductible?

If you are a self-employed sole proprietor or operate an LLC or S-corporation any expense that your business incurs that is ordinary and necessary is deductible under Section 162 of the Internal Revenue Code. Therefore, please list the total spent on the expense categories listed below:

Accounting, legal and professional fees;

Advertising;

Car expense need total miles driven, business miles plus parking and tolls including business log with date, miles driven, business purpose and destination or
total miles driven, actual fuel invoices, auto insurance, repairs and total miles driven and business miles plus parking & tolls;

Fixed Assets – If you bought a vehicle, computer, equipment, office furniture or placed it in service during the tax year, even if you already owned it, bring in the purchase invoice so we can expense it under IRC Sec. 179;

W-3 – Salaries that your company paid to others. List officer and shareholder salary separately;

Employer share of employment taxes like FICA and FUTA;

Commissions or fees paid to other contractors, Get them to fill in W-9 if not incorporated so we can issue them a 1099;

If you already issued them a 1099, bring in the 1096 – showing total independent contractors paid.

Professional Liability Insurance, Workmans Compensation Insurance and Health insurance;

Office Supplies;

Materials or Purchase of inventory for resale;

Travel, Hotel, Airfare and Car Rental;

Meals (need date, place, person entertained and business purpose) Only need receipt if you pay more than $75.00 and have a day timer, If you do not have a day timer or digital calendar (such as Outlook or Google Calendar) then you need a receipt for everything;

Telephone include local, long distance, fax, land lines and mobile;

DSL, cable and internet charges;

Postage;

Continuing education and business seminars and conferences;

Interest expense paid on business loans and provide year end balances;

Rent for office space or equipment;

Utilities like electricity, fuel oil, water or gas.

Prior year PA franchise (Capital Stock) tax from Page 2 of the PA RCT-101;

Prior Year Local Income Tax paid;

Total state sales tax paid if you included it in gross sales receipts.

Remember to never pay any personal expenses from your business bank account but instead transfer them to your personal account. Feel free to contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604, if you have any questions or need your tax returns prepared.

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