D’ya know that suicide rates spike toward the end of tax season? Fortunes Forward is offering one potential solution to those morbid thoughts…

Free Tax Assistance!

The Volunteer Income Tax Assistance Program (VITA) offers the low- to moderate-income earner free tax services. Highly motivated accounting and finance students (myself included) are training rigorously for the next month to provide you with a free tax consultation. Upon our certification, we will be qualified to determine whether this program can be of assistance to you and your family. If so, we will happily prepare your Federal and New York State tax returns free of charge.

To locate the nearest VITA site, call 1-800-829-1040. Please be sure to bring:

• Proof of identification

• Social Security Cards for you, your spouse and dependents and/or a Social Security Number verification letter issued by the Social Security Administration

• Birth dates for you, your spouse and dependents on the tax return

• Current year’s tax package if you received one

• Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers

• Interest and dividend statements from banks (Forms 1099)

• A copy of last year’s Federal and State returns if available

• Bank Routing Numbers and Account Numbers for Direct Deposit (for that juicy tax refund! If you bring us a blank check, we’ll be able to deduce that information for you.)

• Total paid for day care provider and the day care provider’s tax identifying number (the provider’s Social Security Number or the provider’s business Employer Identification Number)

• To file taxes electronically on a married filing joint tax return, both spouses must be present to sign the required forms.

If you’re over 60, or if you’re in the armed services, there might be a volunteer tax service catering specifically to your tax returning needs.

People over 60 may want to look into Tax Counseling for the Elderly (TCE), a similar volunteer program sponsored by AARP. Call 1-888-227-7669 to find the closest of their 7000 sites across the US.

For our soldiers, the Armed Forces Tax Council (AFTC) is another volunteer tax service prepared to handle the unique needs of those serving in the Army, Air Force, Navy, Marine Corps, and Coast Guard, as well as their families. I don’t know who you’d call for that. It might be wise for you to ask your commanding officer what’s good with that shit.

In the mean time, I spent ten bucks on my VITA textbook, and I’m hoping to turn that investment into profits! By that I mean — if I show up at your office with a pocket full of 1040s charging $25 for a tax consultation, don’t be fooled. You can get the same service for free! (Just call 1-800-829-1040)

I’d like to take this opportunity to plug the VITA sponsors: UHY, your support has been crucial; to the City University of New York, thank you for making this city that much more hospitable for the little guy; and finally to the IRS. Without the Internal Revenue Service, none of this would be possible.

-Eric Jason Siegel

It’s a question that likely is gnawing at every David Archuleta fan in the aftermath of the “American Idol” finale: How could the 17-year-old Murray kid with the golden voice and vast teen following lose on television’s biggest show?

After all, from the first live episode where he effortlessly sang “Shop Around,” Archuleta quickly captured the imaginations of millions of 12- to 15-year-olds with his cherubic face, soft grin and soulful voice.

Click Here to Read the Full Story

Probably one of the must unknown facets of retirement planning is that you can distribute before age 59 ½ for any reason without paying the extra 10% early distribution tax. How?

Substantially Equal Periodic Payments

1. Set a distribution schedule calculated using IRS tables
2. The schedule must have regular payments of a certain consistent amount.
3. You must make receive these distributions from your retirement account either until you reach age 59 ½ or for a 5 year period… whichever is longer.

Internal Revenue Code Section 72(t) is where the extra 10% tax for “early distributions” (before age 59 ½) is imposed. However, if you read on to IRC 72(t)(2)(A)(iv) it is explained that the 10% tax is not applicable to any distribution that is part of a series of Substantially Equal Periodic Payments – or SEPP for short.

To give you an idea of how this works using calculations from IRS life expectancy tables, let’s examine a fictional case study with round numbers for simplicity:

Jared is considering early retirement at age 45, and over the years he has grown his IRA to an asset value of $2,000,000. He isn’t sure whether he wants to completely retire, work part time, pursue a career change, or start a new business. Let’s take a look at his options…

Jared’s Maximum Penalty Free Distributions

If Jared subjects his entire $2 million to a SEPP distribution plan, he would receive $8,001.66 per month or $96,020 per year.

There are three methods of calculation (amortization, annuitization, minimum distribution). This maximum is a result of opting for the amortization method.

Jared’s Minimum Penalty Free Distributions

A SEPP plan can involve one retirement account or any combination of multiple retirement accounts. Because of this, there is no actual minimum amount of SEPP distributions. Jared can allocate his retirement funds among one or many retirement accounts and then choose which one(s) he wants to include in the SEPP distribution plan. Theoretically, Jared could put only $100 into an IRA and then begin a SEPP distribution plan for that IRA only.

The general rule is that these SEPP distributions must continue in the same amount & frequency until the longer of 5 years or reaching age 59 ½… but there are ways to create flexibility.

Starting high, then reducing the distributions later

If Jared starts out with the maximum (by subjecting all of his $2 million of funds to the amortization method – resulting in about $8k per month) and later wants to reduce his distributions, he is allowed to make a one time change to the minimum distribution method. This would change his distributions to $4,295.50 per month (or $51,546 per year). This one time change does not compromise the exemption from the extra 10% tax. It’s important to note that you cannot make a one time change in the other direction (to either amortization or annuitiziation method).

Starting low, then increasing the payments later

The maximum is the maximum, but if you think that you may want to start out with less than the max distributions while leaving the opportunity to increase to the maximum later, there are options. If Jared wants only $2,000 per month from his SEPP, he can opt to put about $500,000 into its own IRA and subject only that account to the SEPP (using the amortization method). A couple years later he wants to increase to the maximum, so he begins a new/separate SEPP distribution schedule for an additional $1 million of his retirement funds. This second SEPP schedule creates $4,000.83 in monthly distributions in addition to the $2,000 per month he gets from his first SEPP.

A few years later, he decides he wants to reduce his payments, so he changes his 2nd SEPP distribution schedules to the minimum distribution method reducing it from $4,000.83 per month to $2,147.75 per month, while the 1st SEPP schedule remains at $2,000 per month.

Where to Start?

Once you’ve established how much you want to receive from your SEPP schedule, it is advisable to prepare documentation of its commencement and calculations. This documentation should encourage any custodian or administrator (involved in the distributions) to complete your 1099-R in a way that reports your SEPP distributions as exempt from the extra 10% tax. If they report it as normal early distributions (subject to the extra 10% tax), you can still fill out IRS form 5329 to claim the exemption.

If your SEPP schedule is not setup properly, the extra 10% early distribution tax may be retroactively applied to all early distributions. My company will prepare the needed SEPP documentation for a reasonable fee.

Your numbers

Generally, the higher you account asset value, the higher your potential maximum SEPP distributions. Also, the higher your age, the higher your potential maximum SEPP distributions. Contact me to find out what your maximum SEPP schedule would be and your options on planning for flexibility.