Sunday, January 19, 2020

Nigerian Oil And IRS Termination Assessment


I am reading a 34-page case that starts with the following:
During the first quarter of 2015 petitioner received about $750,000 from entities allegedly seeking to purchase Nigerian crude oil. Shortly thereafter he attempted to wire $300,000 to a foreign bank. The U.S. Secret Service flagged the transaction and alerted the Internal Revenue Service.  Believing that petitioner intended ‘quickly to depart from the United States or to remove his property therefrom,’ the IRS made a termination assessment under Section 6851(a).
I have never seen a termination assessment in practice.

It has to do with IRS Collections, and one does not just stumble into this. The IRS discovers (or is otherwise led to believe) that one has concealed assets with no intention of informing the IRS.
COMMENT: BTW a taxpayer has probably crossed the line from civil to criminal here. He/she should see a tax attorney, as matters are going south very soon.  
If dealing with a tax year for which the filing date has passed (for example, your 2018 tax year) then the collection is referred to as a jeopardy assessment.

If dealing with one’s current tax year, then it is a termination assessment. The IRS just closes your tax year (irrespective of what month or day it is), fast-forwards the notice periods and goes after your assets.  Think drug trafficking, for example, and you get the idea.

The other thing that would trigger a termination assessment is suspicion that one is going to flee the country.

Our protagonist is named Ugori Timothy Wilson Onyeani. Nope, I cannot explain how that collection of names came together, but let’s hereafter refer to him as UTWO.

UTWO was born in Nigeria. He moved to the U.K. to practice medicine. There was misconduct and his medical license was revoked. He came to the U.S. and got an MBA from DeVry University.

In the same year as he graduated from DeVry, he incorporated American Hope Petroleum & Energy Corp (AHPE). Mind you, there were no Board of Directors, employees, records, meetings, operations or the glimmer of any.

What it did have was a website.
 COMMENT: You see this coming, don’t you?
UTWO presented AHPE as an “independent crude oil purchasing and selling expert,” alleging it had “a team of experts” and was “securely invested in crude purchasing.”
COMMENT: Did I mention that UTWO had zero background in oil and gas? One would think his father was a politician.
He represented that he was brokering the sale of crude oil owned by the Nigerian National Petroleum Corporation (NNPC).

Mind you, the NNPC had no idea who he was, but let us not interrupt UTWO’s story.

A couple of companies stepped-up and wanted to buy oil from AHPE. There are deposits for such things, so the two advanced $744,895.
COMMENT: Born every minute, it seems.
On or around March 3, 2015 UTWO attempted to wire $300 grand to London. His bank flagged the transaction and starting investigating. He responded by opening accounts at another bank, one in his name and one in AHPE’s name.

UTWO was scrupulous about handling company funds, though, using them for clearly business purposes such as trips to Sea World, purchases from Victoria’s Secret, trips to aquariums and flooring for his house.

Eventually the second bank also got spooked about AHPE/UTWO’s activities and froze his accounts.

The Secret Service informed the IRS, who came in with an audit. They found deposits over $800 grand (income as far as the IRS was concerned), no business expenses and a tax bill of $289,043.

The bank remitted the $289 grand to the IRS. The bank was no fool.

Then came a twist:  AHPE/UTWO returned $400 grand of advance deposits in a private settlement.

All the above took place in the same year - 2015. 

In 2016 UTWO and his wife filed their joint individual income tax return. The return reported his wife’s income of $41,893 and that was about it.

The IRS had a meltdown. It had found $800 grand, and UTWO was reporting none of it. The IRS wanted tax of $273,407, a fraud penalty of $205,055 and a slushee machine.
COMMENT: The fraud penalty is 75%. Never, ever go there.
Off they went to Tax Court.

Let’s go through the numbers again. The IRS found approximately $800 grand. AHPE/UTWO returned $400 grand of it. This leaves $400 grand. The IRS levied a tax payment of $289 grand, representing a tax rate of over 70%.

What about the fraud penalty of $205 grand, asked the IRS.

Where is the evasion - a badge of fraud - asked the Court.

The IRS answered: the fraud occurred when he filed a personal return leaving out the $800 grand.

Disagree, answered the Court. UTWO was preserving the position he was arguing in Court, i.e., that the IRS assessment was improper. It would have been legal suicide for him to report otherwise.

And the funds were held in IRS escrow, pointed out the Court. At that point evasion of tax was impossible.

The Court determined that no penalties were appropriate.

And UTWO got out of this as well as possible.

The key?

That he received $800 grand and repaid $400 grand in the same year. As a cash-basis taxpayer, he could not deduct that $400 grand until he paid it. He paid it in the same year as he received the $800 grand, so he could net the two.

I suspect he will get a refund.

Sunday, January 12, 2020

Can You Have Reasonable Cause For Filing Late?


I am looking a reasonable cause case.

For the non-tax-nerds, the IRS can abate penalties for reasonable cause. The concept makes sense: real life is not a tidy classroom exercise. If you have followed me for a while, you know I strongly believe that the IRS has become unreasonable with allowing reasonable cause. I have had this very conversation with multiple IRS representatives, many of whom agree with me.

I am looking at one where the penalty was $450,959.

To put that in perspective, a January 29, 2019 MarketWatch article stated that the median 65-year-old American’s net worth is approximately $224,000.

Surely the IRS would not be assessing a penalty of that size without good reason – right?

Let’s go through the case.

Someone died. That someone was Agnes Skeba, and she passed away on June 10, 2013.

Agnes had an estate of approximately $14 million, the bulk of which was land (including farmland) and farm machinery. What the estate did not have was a lot of cash.

On March 6, 2014 the attorney sent an extension form and payment of $725,000 to the IRS.         
COMMENT: An estate return is due within 9 months of death, if the estate is large enough to require a return. Seems within 9 months to me.

The attorney included the following letter with the payment:

Our office is representing Stanley L. Skeba, Jr. as the Executor of the Estate of Agnes Skeba. Enclosed herewith is a completed “Form 4768 — Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes” along with estimated payment in the amount of $725,000 made payable to “The United States Treasury” for the above referenced Estate Tax.
Additionally, we are requesting a six (6) month extension of time to make full payment of the amount due. Despite the best efforts of this office and the Executor, the Estate had limited liquid assets at the time of the decedent’s death. Accordingly, we have been working to secure a mortgage on a substantial commercial property owned by the Estate in order to make timely payment of the balance of the Estate Tax anticipated to be due.

Currently, we have liquid assets in the amount of $1.475 million and the estimated value of the total estate is $14.7 million. Accordingly, we have submitted payments in the amount of $575,000 to the State of New Jersey, Division of Revenue, for State estate taxes payable and in the amount of $250,000 to the Pennsylvania Department of Revenue for State inheritance taxes payable. We are hereby submitting the balance of available funds to you, in the amount of $725,000, as partial payment of the expected U.S. Estate Taxes for the Estate.

We are in the process of securing a mortgage, which was supposed to close prior to the taxes being due, in the amount of $3.5 million that would have permitted us to make full payment of the taxes timely. Due to circumstances previously unknown and unavoidable by the Executor, the lender has not been able to comply with the closing deadline of March 7, 2014. It is anticipated that the lender will be clear to close within fourteen (14) days and then we will remit the balance of the estimated U.S. Estate Taxes payable.

Additionally, there has been delays in securing all of the necessary valuations and appraisals due to administrative delays caused by contested estate litigation currently pending in Middlesex County, New Jersey.

I would say he did a great job.

But the estate did not pay-in all of its estimated tax ….

A few days later the estate was able to refinance. The estate made a second payment of $2,745,000 on March 18, 2014. This brought total taxes paid the IRS to $3,470,000.

COMMENT: Mrs. Skeba died on June 10th. Add 9 months and we get to March 10th. OK, the second payment was a smidgeon late.

Now life intervened. It took a while to get the properties appraised. The executor had health issues severe enough to postpone the court proceedings several times. The estate’s attorney was diagnosed with cancer, delaying the case. Eventually the law firm replaced him as lead attorney altogether, which caused further delay.

As we said: life.

The estate asked for an extension for the federal estate tax return. The filing date was pushed out to September 10, 2014.

The estate was finally filed on or around June 30, 2015.

          COMMENT: Nine-plus months later.

The tax came in at $2,528,838, with estimated taxes of $3,470,000 paid-in. The estate had a refund of $941,162.

Until the IRS slapped a $450,959 penalty.

Huh?

The IRS calculated the penalty as follows: 
$2,528,838 – 725,000 = 1,803,838 times 25% = $450,959

The reason? Late filing said the IRS.

On first pass, it seems to me that the worst the IRS could do is assess penalties for 8 days (from March 10 to March 18). Generally speaking, penalties are calculated on tax due, meaning the IRS has to spot taxes you already paid-in.

In addition, need we mention that the estate was OVERPAID?

The attorney asked for abatement. Here is part of the request:

Beyond September 10, 2014, the Estate continued to have delays in filing due to the pending and anticipated completion of the litigation over the validity of the decedent’s Will, which would impact the Estate’s ability to complete the filing and the executor’s capacity to proceed. Initially, it, was anticipated that the trial of this matter would be heard before Judge Frank M. Ciuffani in the Superior Court of New Jersey in Middlesex County, Chancery Division-Probate Part in July of 2014. Due to health concerns on behalf of the Plaintiff, Joseph M. Skeba, the Judge delayed these proceedings multiple times through the end of 2014, each time giving us a new anticipation of the completion of the trial to permit the estate tax return to be filed. Upon the Plaintiffs improved health, the Judge finally scheduled a trial for July 7, 2015, which was expected to allow our completion in filing the return.
           
Accordingly, this litigation, which was causing us reason to delay in the filing, gave rise to the estate’s inability to file the return.

Finally, in May of 2015 we were notified of the Estate’s litigation attorney, Thomas Walsh of the law firm of Hoagland Longo Moran Dunst & Doukas, LLP, that he was diagnosed with cancer that would possibly cause him to delay this matter from proceeding as scheduled. In early June, we were notified by Mr. Walsh’s office that his prognosis had worsened and he would be prevented from further handling the litigation of this matter, so new counsel within his firm would be assisting in carrying this matter through trial. Due to the change in counsel, it was deemed that the anticipated trial was no longer predictable in scheduling, so the Estate chose to file the return as it stood at such time.

Displaying the compassion and goodwill toward man of deceased General Soleimani, on or around November 5, 2015 the IRS responded to the attorney’s letter and stated that the reasons in the letter did not “establish reasonable cause or show due diligence.”

Shheeeessshh.

The accountant got involved next. He included an additional reason for penalty abatement:

I do not believe the IRS had knowledge of the extension in place at the time the penalty was assessed, nor did they have a record of the additional payment of $2,745,000. The IRS listed the unpaid tax as $1,803,838 and charged the maximum 25% to arrive at the penalty of $450,959.50. The estate not only paid the entire tax the estate owed by the due date to pay but also had an overpayment. Section 6651(b) bars a penalty for late filing when estimated taxes are paid.
           
The IRS did not respond to the accountant.

The accountant tried again.

Here is the Court:

                To date, IRS Appeals has not responded to either letter.

I know the feeling, brother.

You know this is going to Court. It has to.

The estate’s argument was two-fold:
  1.  The estate was fully paid-in. In fact, it was more than fully paid-in.
  2.  There was reasonable cause: an illiquid estate, health issues with the executor, issues with obtaining appraisals, an estate attorney diagnosed with cancer, on and on.

The IRS came in with hyper-technical wordsmithing.

Based on § 6151, the Government cleverly reasons that the last day for payment was nine months after the death of Agnes Skeba—March 10, 2014; because no return was filed by that date a penalty may be assessed. Applying the rationale to the facts, the Government contends only $750,000 was paid on or before March 10, 2014, when $2,528,838 was due on that date. Referring back to § 6651(a)(1), a 25% penalty on the difference may therefore be assessed because it was not paid by March 10, 2014. As such, the full payment of the estate tax on March 18, 2014 is of no avail because the “last date fixed” was March 10, 2014. Accordingly, the Government argues that the imposition of a penalty in the amount of $450,959.00 is appropriate.

The Court brought out its razor:

The Government puts forth a valid point that there is an administrative need to complete and close tax matters. Here, the Estate had nine months to file the return, the extension added six months, and Defendant unilaterally added another nine months to file the return. Although there was the timely payment of the estate taxes, the matter, in the Government’s view, lingered and the administrative objective to timely close the file was not met. See generally Boyle, 469 U.S. at 251. There may be a need for some other penalty for failure to timely file a return, but Congress must enact same.

Slam on the wordsmithing.

COMMENT: Boyle is the club the IRS trots out every time there is a penalty and a late return. The premise behind Boyle is that even an idiot can Google when a return is due. The IRS repetitively denies penalty abatement requests – with a straight face, mind you – snorting that there is no reasonable cause for failure to rise to the level of a common idiot.

That said: did the estate have reasonable cause?

Finally, another issue in this case is whether Plaintiff demonstrated reasonable cause and not willful neglect in allegedly failing to timely file its estate tax return. Although the Court has already determined that the penalty at issue was not properly imposed pursuant to the Government’s flawed statutory rationale, it will review this issue for completeness.

In the tax world, folks, that is drawing blood.

In this case, Mr. White submitted his August 17, 2015 letter explaining the rationale for not filing. (See supra at pp. 5-6). For example, in Mr. White’s letter, he indicated that certain estate litigation was delayed due to health conditions suffered by the executor. (Id.). Additionally, Mr. White refers to the Hoagland law firm and one of the attorneys assigned to the case as having been diagnosed with cancer. (Id.). The Hoagland firm is a very prestigious and professional firm and based on same, Mr. White’s letter shows a reasonable cause for delay.

In addition, Mr. White’s prior letter of March 6, 2014 notes that there was difficulty in “securing all of the necessary valuations and appraisals. . . caused by the contested litigation.” (Hayes Cert., Ex. C). Drawing from my professional experience, such appraisals often require months to prepare because a farm located in Monroe, New Jersey will often sit in residential, retail, and manufacturing zones. To appraise such a farm requires extensive knowledge of zoning considerations. Thus, this also constitutes a reasonable cause for delay.

I hope this represents some whittling away of the Boyle case. That said, I wonder whether the IRS will appeal – so it can protect that Boyle case.

I would say the Court had little patience with the IRS clogging up the pipes with what ten-out-of-ten people with common sense would see as reasonable cause.

Our case this time for the home gamers was Estate of Agnes R. Skeba vs U.S..

Sunday, January 5, 2020

Having Assets And Filing An Offer In Compromise


I glanced at the case because it involved an offer in compromise, a collections hearing, a lien and currently noncollectible (CNC) status.

That is a lot going on for approximately $23 grand in tax debt.

First thing I noticed was that the taxpayer represented himself before the Tax Court. This is referred to as “pro se.” It happens quite a bit, and it usually does not work out well for the taxpayer.

I double-shudder when I think about “pro se” and going hard procedural with the IRS, such as with liens and offers in compromise.

Let’s walk through it:

(1) On November 16, 2016 the taxpayer filed an Offer in Compromise. The tax was approximately $23 grand. He offered approximately $12 grand.
COMMENT: There are several “flavors” of Offers in Compromise. This one was the traditional vanilla: inability to pay or to pay in full. Those late-night commercials are hawking this type.
(2) On May 30, 2017 the IRS sent a Notice of Federal Tax Lien Filing.

The taxpayer filed for a hearing, called a Collection Due Process (CDP) hearing. I probably would have done the same.

(3) On July 11, 2017 the IRS indicated it would not accept the Offer in Compromise, at least as submitted. 

Taxpayer appealed. Again, I probably would have done the same.

(4) On September 27, 2017 the IRS settlement officer sent taxpayer a letter that the CDP hearing was being delayed until the Offer in Compromise was resolved.
COMMENT: Left hand: right hand. Happens all the time.
(5) Wouldn’t you know that the appeal of the Offer in Compromise was assigned to the same IRS settlement officer handling the Collections hearing?

(6) The IRS scheduled a telephone hearing for December 14, 2017. The settlement officer also offered to place the taxpayer’s case in currently noncollectible (CNC) status.
COMMENT: I have used CNC status over the years, especially during and after the Great Recession of 2008. The IRS realizes that there is no money to collect, so it places the case on hold, generally for a year or so. Their normal collections machinery is paused.
Mind you, the IRS is not writing-off the debt. They are allowing a break in collection activity, hoping your situation improves.
(7) Not waiting until the hearing, taxpayer on December 1 sent the settlement officer a letter addressing the rejection of his offer in compromise.
COMMENT. He should include additional or expanded financial information, as his offer was based on inability to pay. The common-sense response to rejection of an offer based on inability to pay is to expand on why one is unable to pay.
Having taken the stage, taxpayer also alleged that the IRS engaged in criminal activity.
COMMENT: Stop that. You are not winning with that behavior.
The settlement officer rescheduled the hearing for January 9th.

(8)  On December 12 taxpayer sent the settlement officer another letter lamenting the rejection of his offer in compromise.
COMMENT: Once again: no additional or expanded financial information. This action was fruitless and ill-advised.
(9) We finally get to the hearing. The settlement officer reviewed the offer in compromise. She sees debt of approximately $23 grand and assets of approximately $110 grand. Receiving no additional or expanded financial information from the taxpayer, the officer decided that rejection of the offer was appropriate.

(10) After the hearing taxpayer sent a letter to the settlement officer, complaining about the IRS Fresh Start Program and including correspondence the taxpayer previously exchanged with the Taxpayer Advocate Service.

Taxpayer was focused on the lien and highlighted a TAS letter including the statement “the IRS has determined that the lien should be withdrawn.”

He wanted the lien withdrawn.

The settlement officer, to her credit, looked into this. It did not change the outcome, but she did try.

The immediate takeaway is the someone with $100-plus grand in assets is probably not going to be able to offer-down $23 grand in tax debt, irrespective of having low income. While true as a generalization, there are several specific considerations.

(1)  Given his focus on removing an IRS lien, I presume that taxpayer’s house comprised most if not all of taxpayer’s assets. I can see not wanting to refinance when one has limited income. In truth, one probably could not refinance, as no traditional mortgage provider would originate the loan.
a.     And there is how I would respond to the request for additional financial information: by providing rejection letters from a couple of mortgage companies.

(2)  Let’s say that the house is not the lion’s share of the assets. Perhaps it is something else, like a retirement account.
a.     If a retirement account, I would argue economic hardship.
                                                                         i.      That is, taxpayer needs that asset and the income therefrom in order to meet reasonable basic living expenses. The loss of said asset would be an economic hardship.
                                                                      ii.      It is already stipulated that the taxpayer is low income. How hard of an argument is this?

(3)  In general, I am unmoved by the IRS filing a lien.
a.     I may be moved if disclosure of said lien would adversely affect one’s career or public status (a mayor or judge, for example), but those instances are few and far between.
b.     Distinguish a lien from a levy.
                                                                         i.      A lien just secures the government’s interest. A lien on my house cannot be collected until I sell the house.
                                                                      ii.      A levy is a different matter. The IRS going into your bank account is an example of a levy.

(4)  Let’s circle back to the presumption that taxpayer’s residence represented the majority of his assets, hence his focus on removing the lien. The IRS just bounced his offer. What happens next?
a.     Folks, the IRS cannot (barring exceptional circumstances) take one’s primary residence.
b.     Yep, he will get periodic and annoying IRS correspondence, but …
c.     … so what? There is little bite left in that dog.
d.     And after 10 years (without the IRS taking the matter to Court to obtain judgement), the statute of limitations will kick-in.

You can see the downside to a pro se, especially when dealing with IRS procedure. There is a lot going on here, and I suspect that – with professional advice – taxpayer could have gotten the offer. I doubt he would have gotten the lien released, though. He saved a few grand in professional fees in order to completely strike out with the IRS.

The case for the home gamers is Banks, TC Memo 2019-166.

Sunday, December 29, 2019

Change In The Kiddie Tax


Congress took a tax calculation that was already a headache and made it worse.

I am looking at a tax change included in the year-end budget resolution.

Let’s talk again about the kiddie tax.

Years ago a relatively routine tax technique was to transfer income-producing assets to children and young adults. The technique was used mainly by high-income types (of course, as it requires income), and the idea was to redirect income that would be taxed at a parent’s or grandparent’s (presumably maximum) tax rate and tax it instead at a child/young adult’s lower tax rate.

As a parent, I immediately see issues with this technique. What if one of my kids is responsible and another is not? What if I am not willing to just transfer assets to my kids – or anyone for that matter? What if I do not wish to maximally privilege my kids before they even reach maturity? Nonetheless, the technique was there.

Congress of course saw the latent destruction of the republic.

Enter the kiddie tax in 1986.

In a classroom setting, the idea was to slice a kid’s income into three layers:

(1)  The first $1,050
(2)  The second $1,050
(3)  The rest of the kid’s income

Having sliced the income, one next calculated the tax on the slices:

(1)  The first $1,050 was tax-free.
(2)  The second $1,050 was taxed at the kid’s own tax rate.
(3)  The rest was taxed at the parents’ tax rate.

Let’s use an example:

(1)  In 2017 the kid has $20,100 of income.
(2)  The parents are at a marginal 25% tax rate.

Here goes:

(1)  Tax on the first slice is zero (-0-).
(2)  Let’s say the tax on the second slice is $105 ($1,050 times 10%).
(3)  Tax on the third slice is $4,500 (($20,100 – 2,100) times 25%).

The kid’s total 2017 tax is $4,605.

Let’s take the same numbers but change the tax year to 2018.

The tax is now $5,152.

Almost 12% more.

What happened?

Congress changed the tax rate for slice (3). It used to be the parent’s tax rate, but starting in 2018 one is to use trust tax rates instead.

If you have never seen trust rates before, here you go:
          

Have over $12,500 of taxable income and pay the maximum tax rate. I get the reasoning (presumably anyone using trusts is already at a maximum tax rate), but I still consider these rates to be extortion. Sometimes trusts are just that: one is providing security, navigating government programs or just protecting someone from their darker spirits. There is no mention of maximum tax rates in that sentence.

Let’s add gas to the fire.

The kiddie tax is paid on unearned income. The easiest type to understand is dividends and interest.

You know what else Congress considered to be unearned income?

Government benefits paid children whose parent was killed in military service. These are the “Gold Star” families you may have read about.

Guess what else?

Room and board provided college students on scholarship.

Seriously? We are taking people unlikely to be racking Thurston Howell III-level bucks and subjecting them to maximum tax rates?

Fortunately, Congress – in one of its few accomplishments for 2019 – repealed this change to the kiddie tax.

We are back to the previous law. While a pain, it was less a pain than what we got for 2018.

One more thing.

Kids who got affected by the kiddie tax changes can go back and amend their 2018 return.

I intend to review kiddie-tax returns here at Galactic Command to determine whether amending is worthwhile.

It’s a bit late for those affected, but it is something.

Sunday, December 22, 2019

Year-End Retirement Tax Changes


On Friday December 20, 2019 the President signed two spending bills, averting a government shutdown at midnight.

The reason we are talking about it is that there were several tax provisions included in the bills. Many if not most are as dry as sand, but there are a few that affect retirement accounts and are worth talking about.

Increase the Age for Minimum Required Distributions (MRDs)

We know that we are presently required to begin distributions from our IRAs when we reach age 70 ½. The same requirement applies to a 401(k), unless one continues working and is not an owner. Interestingly, Roths have no MRDs until they are inherited.

In a favorable change, the minimum age for MRDs has been increased to 72.

Repeal the Age Limitation for IRA Contributions

Presently you can contribute to your 401(k) or Roth past the age of 70 ½. You cannot, however, contribute to your IRA past age 70 ½.

In another favorable change, you will now be allowed to contribute to your IRA past age 70 ½.

COMMENT: Remember that you generally need income on which you paid social security taxes (either employee FICA or self-employment tax) in order to contribute to a retirement account, including an IRA. In short, this change applies if you are working past 70 ½.

New Exception to 10% Early Distribution Penalty

Beginning in 2020 you will be allowed to withdraw up to $5,000 from your 401(k) or IRA within one year after the birth or adoption of a child without incurring the early distribution penalty.

BTW, the exception applies to each spouse, so a married couple could withdraw up to $10,000 without penalty.

And the “within one year” language means you can withdraw in 2020 for a child born in 2019.

Remember however that the distribution will still be subject to regular income tax. The exception applies only to the penalty.

Limit the Ability to Stretch an IRA

Stretching begins with someone dying. That someone had a retirement account, and the account was transferred to a younger beneficiary.

Take someone in their 80s who passes away with $2 million in an IRA. They have 4 grandkids, none older than age 24. The IRA is divided into four parts, each going to one of the grandkids. The required distribution on the IRAs used to be based on the life expectancy of someone in their 80s; it is now based on someone in their 20s. That is the concept of “stretching” an IRA.

Die after December 31, 2019 and the maximum stretch (with some exceptions, such as for a surviving spouse) is now 10 years.

Folks, Congress had to “pay” for the other breaks somehow. Here is the somehow.

Annuity Information and Options Expanded

When you get your 401(k) statement presently, it shows your account balance. If the statement is snazzy, you might also get performance information over a period of years.

In the future, your 401(k) statements will provide “lifetime income disclosure requirements.”

Great. What does that mean?

It means that the statement will show how much money you could get if you used all the money in the 401(k) account to buy an annuity.

The IRS is being given some time to figure out what the above means, and then employers will have an extra year before having to provide the infinitely-better 401(k) statements to employees and participants.

By the way …

You will never guess this, but the law change also makes it easier for employers to offer annuities inside their 401(k) plans.

Here is the shocked face:


 Expand the Small Employer Retirement Plan Tax Credit

In case you work for a small employer who does not offer a retirement plan, you might want to mention the enhanced tax credit for establishing a retirement plan.

The old credit was a flat $500. It got almost no attention, as $500 just doesn’t move the needle.

The new credit is $250 per nonhighly-compensated employee, up to $5,000.

At $5 grand, maybe it is now worth looking at.