Tax Developments Affecting Retirees
(For details, click on the following headings)
Charitable Beneficiary Designations
- Tax avoidable on charitable beneficiary designations for IRAs or qualified plans
IRA Tax Developments
- Distributions taxed to former spouse regardless of community property laws
- Protection from bankruptcy for funds in IRAs and retirement plans
- IRS allowed correction of overpayment of required minimum IRA distribution
- Division of an inherited IRA held by a trust
- Use of multiple trusts to maximize IRA tax deferral
- Transfer of funds from an IRA to a health savings account
- Division of IRA in divorce with consequent reduction of distributions
- IRS allowed an IRA loan to a church secured by life insurance
- Personal sale of stock at a loss and repurchase by an IRA
- IRA distributions paid directly to charities
- Withdrawal of after-tax excess contributions
Required Minimum Distributions for Plans and IRAs
- Suspension of minimum distribution requirements for 2009
- Minimum distribution flexibility for certain government plans
- Beneficiary designation by judicial reformation
Long-Term Care, Residential Retirement Communities, Etc.
- The Tax Court determines the deductible portion of retirement community fees
- Medical deduction denied for entrance fee paid to residential retirement community
- Taxable interest not imputed on most retirement community fees
- Tax treatment of long-term care insurance included in an annuity or insurance contract
- Trusteed plans for retiree medical expenses
Transfers to Roth IRAs
- Roth conversions allowed for high-income individuals after 2009
- IRS focus on transactions between Roth IRAs and related businesses
- The taxable value of an IRA annuity converted to a Roth IRA
- Correction of defective Roth conversion denied where statute of limitations had run
- Reversal of defective transfers to Roth IRAs allowed though reversal period expired
- Extension of Roth conversions to eligible retirement plans
- Some additional important aspects of taxable contributions to Roth IRAs
- Beneficiary transfers to Roth IRAs
Receipt of Property or Options from Employer
- Using a nonrecourse note to pay for property transferred from an employer
- Exchanges or amendments of nonqualified stock options
Employer Retirement Plans
- Favorable tax treatment for lump sum received soon after start of pension
- Government garnishments of qualified retirement plan benefits are limited
- Some plan distribution restrictions not applicable to rolled-over amounts
- Taxable value of life Insurance distributed by an employer retirement plan
- Protection from bankruptcy for funds in retirement plans
- Rollover allowed for amount of plan funds used to offset plan loan
- Insurance premium payments by plans not taxable to police, firefighters, or emergency workers
- Pension plan distributions to employees working under phased retirement programs
- Distributions must comply with qualified plan documents despite other conflicting claims
- Election to diversify out of employer securities
- No constructive trusts for attorneys fees
- No acceleration of benefits for an IRS levy
- Restitution under the Mandatory Victims Restitution Act
- Transfers from qualified retirement plans to foreign plans
Retiree Rollovers to IRAs and Other Plans
- 60-day rollover period not started by misaddressed lost check
- IRS may waive the 60-day rollover requirement in various circumstances
- No 60-day waiver merely because financial institution declines to proved information
- Proceeds of lawsuit settlement rolled over tax-free to IRA
- Rollover of employer stock not reversible
- Intervening property purchase invalidates attempted IRA rollover
- Rollovers of taxpayer investment from qualified plans to additional types of tax-favored plans
Spouses and Other Beneficiaries
- Spouse’s IRA ownership election significantly impacts retirement plan rollovers
- Spousal rollover to IRA permitted after another beneficiary's proper disclaimer
- Rollovers to IRAs allowed for some indirect distributions to surviving spouses
- IRA ownership election by surviving spouse may lengthen children’s tax deferral
- QDRO distributions taxed to former spouse regardless of community property laws
- Indirect distributions to a former spouse not taxable to the former spouse
- Optional spousal annuity in lieu of required joint and survivor spousal annuity
- Rollovers by nonspouse beneficiaries from decedents' retirement plans to IRAs
- No implied election to avoid penalty for failure to make required distributions
- Spouse or former spouse taxed on QDRO benefits
- Spousal rollovers through a trust
U.S. Military and Survivor Benefits
- Statute of limitations extended for tax refunds triggered by VA awards
- Recovery of prior year withholding taxes after retroactive award of VA benefits
- Surviving spouse tax refund on retroactive grant of veterans benefits
Social Security Tax Developments
- Social security disability payments for combat-related injuries may be taxable
- IRS may levy on social security benefits
Penalty on Early Distributions from an IRA, Plan, or Annuity
- Periodic payments that avoid the 10 percent penalty on early distributions
- Avoidance of early distribution penalty on substantially unequal distributions
- Early distribution penalty on nonpayment of loan due to bankruptcy proceedings
- Relief from penalty on early distributions to public safety employees from governmental plans
- Effect of trustee error on the penalty tax for premature distributions
Nonqualified Employer Retirement Plans
- Parent corporation may guarantee unfunded retirement benefits
- Early payments substantially limited under 409A nonqualified plans
- Taxes, penalties, and interest upon failure to conform to section 409A
- Nonqualified deferred compensation payable by certain foreign entities
- No private letter rulings on nonqualified plan issues
- Deferral of recurring part-year compensation
- TARP executive pay accelerations or deferrals under 409A
- Relief for section 409A operational failures
Hurricane Disaster Tax Relief for IRAs and Qualified Plans
- Elimination of mandatory withholding and the penalty for early withdrawals
- Tax on distribution spread over three years; tax-free rollover period of three years
- Loan limits increased and repayment period lengthened
- Rollover of distributions made to acquire residence
- The 2008 Midwestern disaster area storms
Federal Restrictions on State Income Taxes
- Partner pension exempt from nonresident state income tax
Estate Tax on Retirement Benefits
- Combining income tax deferral with QTIP treatment
Miscellaneous Developments Affecting Retirees
- Tighter restrictions on medical expense deductions
- Relief from new tax on net investment income
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(For details, click on the following headings)
Charitable Beneficiary Designations
- Tax avoidable on charitable beneficiary designations for IRAs or qualified plans
IRA Tax Developments
- Distributions taxed to former spouse regardless of community property laws
- Protection from bankruptcy for funds in IRAs and retirement plans
- IRS allowed correction of overpayment of required minimum IRA distribution
- Division of an inherited IRA held by a trust
- Use of multiple trusts to maximize IRA tax deferral
- Transfer of funds from an IRA to a health savings account
- Division of IRA in divorce with consequent reduction of distributions
- IRS allowed an IRA loan to a church secured by life insurance
- Personal sale of stock at a loss and repurchase by an IRA
- IRA distributions paid directly to charities
- Withdrawal of after-tax excess contributions
Required Minimum Distributions for Plans and IRAs
- Suspension of minimum distribution requirements for 2009
- Minimum distribution flexibility for certain government plans
- Beneficiary designation by judicial reformation
Long-Term Care, Residential Retirement Communities, Etc.
- The Tax Court determines the deductible portion of retirement community fees
- Medical deduction denied for entrance fee paid to residential retirement community
- Taxable interest not imputed on most retirement community fees
- Tax treatment of long-term care insurance included in an annuity or insurance contract
- Trusteed plans for retiree medical expenses
Transfers to Roth IRAs
- Roth conversions allowed for high-income individuals after 2009
- IRS focus on transactions between Roth IRAs and related businesses
- The taxable value of an IRA annuity converted to a Roth IRA
- Correction of defective Roth conversion denied where statute of limitations had run
- Reversal of defective transfers to Roth IRAs allowed though reversal period expired
- Extension of Roth conversions to eligible retirement plans
- Some additional important aspects of taxable contributions to Roth IRAs
- Beneficiary transfers to Roth IRAs
Receipt of Property or Options from Employer
- Using a nonrecourse note to pay for property transferred from an employer
- Exchanges or amendments of nonqualified stock options
Employer Retirement Plans
- Favorable tax treatment for lump sum received soon after start of pension
- Government garnishments of qualified retirement plan benefits are limited
- Some plan distribution restrictions not applicable to rolled-over amounts
- Taxable value of life Insurance distributed by an employer retirement plan
- Protection from bankruptcy for funds in retirement plans
- Rollover allowed for amount of plan funds used to offset plan loan
- Insurance premium payments by plans not taxable to police, firefighters, or emergency workers
- Pension plan distributions to employees working under phased retirement programs
- Distributions must comply with qualified plan documents despite other conflicting claims
- Election to diversify out of employer securities
- No constructive trusts for attorneys fees
- No acceleration of benefits for an IRS levy
- Restitution under the Mandatory Victims Restitution Act
- Transfers from qualified retirement plans to foreign plans
Retiree Rollovers to IRAs and Other Plans
- 60-day rollover period not started by misaddressed lost check
- IRS may waive the 60-day rollover requirement in various circumstances
- No 60-day waiver merely because financial institution declines to proved information
- Proceeds of lawsuit settlement rolled over tax-free to IRA
- Rollover of employer stock not reversible
- Intervening property purchase invalidates attempted IRA rollover
- Rollovers of taxpayer investment from qualified plans to additional types of tax-favored plans
Spouses and Other Beneficiaries
- Spouse’s IRA ownership election significantly impacts retirement plan rollovers
- Spousal rollover to IRA permitted after another beneficiary's proper disclaimer
- Rollovers to IRAs allowed for some indirect distributions to surviving spouses
- IRA ownership election by surviving spouse may lengthen children’s tax deferral
- QDRO distributions taxed to former spouse regardless of community property laws
- Indirect distributions to a former spouse not taxable to the former spouse
- Optional spousal annuity in lieu of required joint and survivor spousal annuity
- Rollovers by nonspouse beneficiaries from decedents' retirement plans to IRAs
- No implied election to avoid penalty for failure to make required distributions
- Spouse or former spouse taxed on QDRO benefits
- Spousal rollovers through a trust
U.S. Military and Survivor Benefits
- Statute of limitations extended for tax refunds triggered by VA awards
- Recovery of prior year withholding taxes after retroactive award of VA benefits
- Surviving spouse tax refund on retroactive grant of veterans benefits
Social Security Tax Developments
- Social security disability payments for combat-related injuries may be taxable
- IRS may levy on social security benefits
Penalty on Early Distributions from an IRA, Plan, or Annuity
- Periodic payments that avoid the 10 percent penalty on early distributions
- Avoidance of early distribution penalty on substantially unequal distributions
- Early distribution penalty on nonpayment of loan due to bankruptcy proceedings
- Relief from penalty on early distributions to public safety employees from governmental plans
- Effect of trustee error on the penalty tax for premature distributions
Nonqualified Employer Retirement Plans
- Parent corporation may guarantee unfunded retirement benefits
- Early payments substantially limited under 409A nonqualified plans
- Taxes, penalties, and interest upon failure to conform to section 409A
- Nonqualified deferred compensation payable by certain foreign entities
- No private letter rulings on nonqualified plan issues
- Deferral of recurring part-year compensation
- TARP executive pay accelerations or deferrals under 409A
- Relief for section 409A operational failures
Hurricane Disaster Tax Relief for IRAs and Qualified Plans
- Elimination of mandatory withholding and the penalty for early withdrawals
- Tax on distribution spread over three years; tax-free rollover period of three years
- Loan limits increased and repayment period lengthened
- Rollover of distributions made to acquire residence
- The 2008 Midwestern disaster area storms
Federal Restrictions on State Income Taxes
- Partner pension exempt from nonresident state income tax
Estate Tax on Retirement Benefits
- Combining income tax deferral with QTIP treatment
Miscellaneous Developments Affecting Retirees
- Tighter restrictions on medical expense deductions
- Relief from new tax on net investment income
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The author intends that this website provide accurate and authoritative information on the subject
matter covered. However, the information provided on this website is not a substitute for the advice of
an attorney, accountant, or other professional; and the author is not offering legal, accounting, or
other professional advice. The material presented on this website is not intended for use, and may
not be used, to avoid tax penalties. If you need legal advice or other professional help, you should
seek (from an independent attorney, accountant, or other competent professional) advice based on
your own particular circumstances.
matter covered. However, the information provided on this website is not a substitute for the advice of
an attorney, accountant, or other professional; and the author is not offering legal, accounting, or
other professional advice. The material presented on this website is not intended for use, and may
not be used, to avoid tax penalties. If you need legal advice or other professional help, you should
seek (from an independent attorney, accountant, or other competent professional) advice based on
your own particular circumstances.
Key Tax Developments Affecting Retirees
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