Tuesday, November 18, 2014

IRS Clarifies Application of One-Per-Year Limit on IRA Rollovers, Allows Owners of Multiple IRAs a Fresh Start in 2015

The Internal Revenue Service has issued guidance clarifying the impact a 2014 individual retirement arrangement (IRA) rollover has on the one-per-year limit imposed by the Internal Revenue Code on tax-free rollovers between IRAs.

The clarification relates to a change, announced earlier this year, in the way the statutory one-per-year limit applies to rollovers between IRAs.  The change in the application of the one-per-year limit reflects an interpretation by the U.S. Tax Court in a January 2014 decision applying the limit to preclude an individual from making more than one tax-free rollover in any one-year period, even if the rollovers involve different IRAs. 

Before 2015, the one-per-year limit applies only on an IRA-by-IRA basis (that is, only to rollovers involving the same IRAs).  Beginning in 2015, the limit will apply by aggregating all an individual’s IRAs, effectively treating them as if they were one IRA for purposes of applying the limitTo help taxpayers by allowing time for transition to the new interpretation, the IRS announced shortly after the January 2014 Tax Court decision that the new interpretation would not apply before Jan. 1, 2015.

In Announcement 2014-32, the IRS made clear that the new interpretation will apply beginning Jan. 1, 2015, and said that a distribution from an IRA received during 2014 and properly rolled over (normally within 60 days) to another IRA, will have no impact on any distributions and rollovers during 2015 involving any other IRAs owned by the same individual. This will give IRA owners a fresh start in 2015 when applying the one-per-year rollover limit to multiple IRAs.

Although an eligible IRA distribution received on or after Jan. 1, 2015 and properly rolled over to another IRA will still get tax-free treatment, subsequent distributions from any of the individual’s IRAs (including traditional and Roth IRAs) received within one year after that distribution will not get tax-free rollover treatment. As today’s guidance makes clear, a rollover between an individual’s Roth IRAs will preclude a separate tax-free rollover within the 1-year period between the individual’s traditional IRAs, and vice versa.

As before, Roth conversions (rollovers from traditional IRAs to Roth IRAs), rollovers between qualified plans and IRAs, and trustee-to-trustee transfers--direct transfers of assets from one IRA trustee to another--are not subject to the one-per-year limit and are disregarded in applying the limit to other rollovers.

IRA trustees are encouraged to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA. IRA trustees can accomplish a trustee-to-trustee transfer by transferring amounts directly from one IRA to another or by providing the IRA owner with a check made payable to the receiving IRA trustee.

More information on the rule change can be found on IRS.gov. Type “IRA” in the search box.

For legal help with your business, asset protection, and estate planning needs contact a business law and estates, trusts, and asset protection lawyer at the offices of AttorneyBritt.

Sunday, November 16, 2014

Starting A Business

Step 1:  Determining Your Business Structure

The first step in starting a business is to decide on a basic legal structure.  This step is important because tax and legal implications vary depending on legal structure.  Once you settle on a legal structure, you will need to properly record the business name with the state and/or county.  For example, in the State of Texas, there are several legal options for setting up your business structure.  Given the tax and legal implications when choosing your business structure, new business owners should always seek the guidance of a professional tax consultant and attorney to verify all legal requirements are met before choosing a business structure.  The business structures in the State of Texas, and in most other states as well, are as follows:

  • Sole Proprietorship
  • General Partnership
  • Limited Partnership
  • Limited Liability Partnership
  • Limited Liability Company, including a “Series Limited Liability Company” which is available in Texas and a few other states (taxed as either a Partnership, “C corporation”, or “Subchapter S corporation”)
  • Corporation (can be taxed as either “C corporation”, or “Subchapter S corporation”)

Step 2:  Federal, State, Austin and Employment Tax Responsibilities

An equally important step in the development of your business is your determine and comply with the various overlapping tax responsibilities of your new business. The following information will guide you to the appropriate Federal, State and Austin agencies who administer business taxes.

(i)  Federal Tax

The Internal Revenue Service (IRS) governs all things related to tax collection at the federal level. In addition, the IRS provides a wealth of business tax related information for small business owners. Simply click on the link below and you will soon be on your way to understand your federal tax responsibilities.
The local IRS Taxpayer Assistance Center provides walk in face-to-face assistance.

(ii)  State Tax

Some states impose a state income tax upon businesses.  All states have sales and use taxes that can apply to businesses.  In some states the agency handling such taxes is referred to as the Department of Revenue.  In Texas there is no personal income tax and technically no corporation income tax, although corporations are subject to a franchise tax that basically applies to corporations with more than a million dollars in assets or more than a million dollars in annual gross revenues.  The franchise tax is very low even in the situations where it does apply.  The Texas Comptroller of Public Accounts is the agency responsible for the administration and collection of the franchise tax and state and local sales tax for businesses operating in the State of Texas.  The following link provides an informative guide that will educate you on the what, when, where, why and how of sales and franchise taxes.  Texas Comptroller of Public Accounts; 111 East 17th Street Austin, Texas 78711 512-463-4600 or 800-252-5555

(iii)  City Taxes

In some states city income taxes exist along with city and/or county sales taxes, personal property taxes, and other fees.  Texas has no city income taxes.  However, most cities or counties will impose city and/or county sales taxes and a business personal property tax upon businesses that own tangible personal property and use that property to produce income.

(iv)  Employment Tax

Internal Revenue Service - Provides specific information regarding your federal employment tax responsibilities.
Texas Workforce Commission - Provides specific information regarding your state and local employment tax responsibilities.

Step 3: Business Licenses and Permits by Business Type

According to Texas Wide Open for Business, the State of Texas does not require a general "business" license; however, there are a number of regulatory agencies that have licensing and permitting requirements based on the type of service, or products associated with your business.  To ensure that all permitting requirements are met, you should contact the local county and/or city government in which you plan to conduct business to determine if there are any additional requirements.  To determine state occupational licensing and permitting requirements, please visit the Texas Department of Licensing and Regulation (TDLR), specifically the TDLR Licensed Programs tab, for more information.  Other states and many cities and/or counties, including Texas, do often require a general business license be obtained from the local city and/or county administration building or clerk’s office.

Step 4: Business Employer Requirements

Texas Wide Open for Business section on employer requirements is a one stop shop for small business owners. The information provided will help entrepreneurs understand and comply with federal and state employer requirements.  There are a number of labor, safety, and reporting laws relating to employment of personnel, thus it is vitally important for small business owners to increase their knowledge and ensure they are in compliance. Click here for more information.  Additionally, the Texas Workforce Commission publishes a great resource for employers. The Especially for Texas Employers is a step by step guide that walks employers and employees thru every aspect of Texas employment law.

Step 5:  Workers Compensation

Workers’ compensation is a state-regulated insurance system that provides covered employees with income and medical benefits if they are injured on the job or have a work-related injury or illness.  Except in cases of gross negligence, workers’ compensation insurance limits an employer’s liability if an employee brings suit against the employer for damages.  In Texas, unlike in most other states, private employers can choose whether or not to carry workers’ compensation insurance coverage.  Visit Texas Department of Insurance for more info

Note:  That the failure to carry workers compensation insurance means the business/employer has additional potential liabilities not and the loss of some defenses in situations where an employee is injured on the job.  A business should not elect to do without workers compensation insurance without first consulting a qualitied business attorney.

Note: New business owners should always seek the guidance of a professional tax and business lawyer.  A business attorney can verify all legal requirements are met before operating a businessa, and make sure the structure of the business and the agreements between the owners of the business provide for smooth operations well into the future in a manner that allows for the non-judicial resolution of disputes between the owners, etc.  A little effort now can save you a lot later!

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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