How Much Can Be Withdrawn From Retirement Savings Safely Each Year?

How Much Can Be Withdrawn From Retirement Savings Safely Each Year?

In retirement planning there is something called the 4% rule. This was the general rule of thumb that you could safely withdraw 4% of your portfolio each year without completely depleting it. This has been a generally accepted rule for many years but lately planners are starting to question it’s wisdom.

The reason is two fold

1) Life expectancy has increased. Meaning hopefully your money will have to last longer.

2) Expected yields have become lower. To quote CNBC “Low interest rates also complicate the picture for savers. A one-year certificate of deposit came with a yield of just 0.28 percent, on average, through most of September, according to Bankrate. That’s hardly enough to generate much retirement income.”

What does this mean for retirees?

1) The 4% rule is still a good starting point but cannot be considered completely safe.

2) It is important to reevaluate your plan frequently

3) Remember there are also laws about required minimum distributions (RMDs) from certain retirement accounts. These penalties for not taking enough out of a tax deferred retirement account can be substantial.

4) It is a good idea to consult with your financial planner or tax professional.

Who Needs an EIN (Employer Identification Number)?

Who Needs an EIN (Employer Identification Number)?

If you answer Yes to any of the following questions you need to have an EIN.

  • Do you have employees?
  • Do you operate your business as a corporation or partnership?
  • Do you file an Employment, Excise or Alcohol, Tobacco and Firearms tax return?
  • Do you have a KEOGH plan
  • Are you involved with any of the following types of organizations?
  • Trusts (except certain grantor owner revocable trusts), IRAs, Exempt Organization Business Income Tax Returns
  • Estates
  • Real estate mortgage investment conduits (REMICs)
  • Non-profit organizations
  • Farmers’ cooperatives
  • Plan administrators


If you need an EIN you can easily obtain one by clicking on the following link to the IRS.

Apply for an Employer Identification Number (EIN) online.


Applying online should take less than 15 minutes from start to finish. Taxpayers and authorized third party designees will receive an EIN immediately upon completion of the application.


The Affordable Care Act and Forms 1094-C and 1095-C

The Affordable Care Act and Forms 1094-C and 1095-C

If you own or manage a business, you will need to be aware of filing requirements relating to the Affordable Care Act.

In general, employers with less than 50 employees are not subject to these reporting requirements. Here’s how to find out if you are exempt from filing:

  1. The cut-off is for 50 FTEs (full time equivalent employees)
  2. If your business is close to 50 employees, you should calculate the number of FTEs to be sure
    1. For purposes of the Affordable Care Act, a full time employee is 30 hours and up
    2. You need to find the hours worked by part-time employees
      1. Part-time employees are those who worked on average less than 30 hours per week, but more than 120 days per year
    3. Seasonal employees are excluded from the calculations
    4. Here is a helpful government linkfor determining FTEs
  3. If you have less than 25 FTEs and provide health insurance you may qualify for the Small Business Health Care Tax Credit

Your accountant can help you figure out your exact amount of FTEs.

If a business has more than 50 FTEs, they are required to file forms Form1095-C (Employer-Provided Health Insurance Offer and Coverage) is filed for each full time employee and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns)

The filing is required for full time employees who participate in the health plan and those who do not

The employer must provide the 1095-C to employees by Feb 1, 2016

The employer must file the forms with the IRS by Feb 29, 2016 (March 31, 2016 if filing electronically)

Form 1094-C filing dates are the same

Grouping of companies with common ownership and self-insured programs are a few of many nuances with this law and it is wise to check with an accounting professional to verify your requirements. The penalties will be severe for not filing.


Moving? If You Receive the Premium Tax Credit, Report this Life Event

Moving? If You Receive the Premium Tax Credit, Report this Life Event

If you’ve moved recently, you’ve probably notified several organizations – like the U.S. Postal Service and utility companies – about your new address. You may have even notified the IRS about your address change. If you get health insurance coverage through a Health Insurance Marketplace, you should add one more important notification to your list: the Marketplace.

If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, to the Marketplace. There’s a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.


Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.

Changes in circumstances that you should report to the Marketplace include:

  • An increase or decrease in your income, including lump sum payments like a lump sum payment of Social Security benefits
  • Marriage or divorce
  • The birth or adoption of a child
  • Starting a job with health insurance
  • Gaining or losing your eligibility for other health care coverage


Many of these changes in circumstances – including moving out of the area served by your current Marketplace plan – qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at


The Premium Tax Credit Change Estimator can help you estimate how your premium tax credit will change if you experience a change in circumstance during the year.


Your Health Insurance Company May Ask for Your Social Security Number

Your Health Insurance Company May Ask for Your Social Security Number

Health coverage providers will file an information return, Form 1095-BHealth Coverage, with the IRS and will furnish statements to you in 2016, to report coverage information from calendar year 2015.


The law requires coverage providers to list social security numbers on this form. If you don’t provide your SSN and the SSNs of all covered individuals to the sponsor of the coverage, the IRS may not be able to match the Form 1095-B with the individuals to determine that they have complied with the individual shared responsibility provision.

Your health insurance company may send a letter that discusses these new rules and requests social security numbers for all family members covered under your policy. The IRS has not designated a specific form for your health insurance company to request this information. The Form 1095-B will provide information for your income tax return that shows you, your spouse, and individuals you claim as dependents had qualifying health coverage for some or all months during the year. You do not have to attach Form 1095-B to your tax return. Keep it with your other important tax documents.

Anyone on your return who does not have minimum essential coverage, and who does not qualify for an exemption, may be liable for the individual shared responsibility payment.

The information received by the IRS will be used to verify information on your individual income tax return. If you refuse to provide this information to your health insurance company, the IRS cannot verify the information you provide on your tax return and you may receive an inquiry from the IRS. You also may receive a notice from the IRS indicating that you are liable for a shared responsibility payment.


Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2015 and Forward

Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2015 and Forward

In general, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The American Opportunity Tax Credit provides a credit for each eligible student, while the Lifetime Learning Credit provides a maximum credit per tax return.

Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. To claim these credits on their tax return, the taxpayer must file Form 1040 or 1040A and complete Form 8863, Education Credits.

The credits apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. The credits are subject to income limits that could reduce the amount claimed on their tax return.

To help determine eligibility for these benefits, taxpayers should visit the Education Credits web page or use the IRS’s Interactive Tax Assistant tool. Both are available on

Normally, a student will receive a Form 1098-T from their institution by Jan. 31 of the following year. (For 2015, the due date is Feb. 1, 2016, because otherwise it would fall on a Sunday.) This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits.

Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.

Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified education expenses paid during the entire tax year for a certain number of years:

  • The credit is only available for four tax years per eligible student
  • The credit is available only if the student has not completed the first four years of post-secondary education before 2015

Here are some more key features of the credit:

  • Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses
  • The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student
  • Forty percent of the American Opportunity Tax Credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student
  • The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more

The Lifetime Learning Credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American Opportunity Tax Credit, the limit on the Lifetime Learning Credit applies to each tax return, rather than to each student. Also, the Lifetime Learning Credit does not provide a benefit to people who owe no tax.

Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:

  • Tuition and fees required for enrollment or attendance qualify, as do other fees required for the course. Additional expenses do not
  • The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability
  • Income limits are lower than under the American Opportunity Tax Credit. For 2015, the full credit can be claimed by taxpayers whose MAGI is $55,000 or less. For married couples filing a joint return, the limit is $110,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $130,000 or more and singles, heads of household and some widows and widowers whose MAGI is $65,000 or more

Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.

There are a variety of other education-related tax benefits that can help many taxpayers. They include:

  • Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses
  • Student loan interest deduction of up to $2,500 per year
  • Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old
  • Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the Earned Income Tax Credit.

The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on