December Key Focus
Holiday Wish List of Tax Code Changes
The holiday season is upon us once again. There are a lot of things we associate with this time of year, but one of the most common has to be exchanging gifts with those we love. We can remember, as children, writing out our wish list each year and the excitement we'd have wondering which gifts we might actually receive. Recalling those days, we thought we would once again prepare a wish list, but with a little twist. Below you will find our holiday wish list to Congress and the IRS for changes we would like to see made to the tax code.
#1 - Get rid of the importance of ½ birthdays
½ is generally the age at which you can take penalty-free
distributions from your IRA. This is a "hard date," meaning that
you must actually be age 59 ½ on the date you take a distribution
in order for it to be penalty free. In addition to age 59 ½, there is
also age 70 ½, which is the age you are when you must begin taking
required minimum distributions (RMDs) from your IRA accounts.
Unlike the age 59 ½ rule, the age 70 ½ rule applies to the whole
year you turn 70 ½, so the first money distributed from your IRA in
that year is automatically deemed to be your RMD and is not
eligible for a rollover. Seriously folks, is this really necessary?
Aren't the IRA rules and the Tax Code complicated enough without
adding in the unnecessary complication of ½ years? What is so
terrible about nice, easy-to-understand numbers like 60 and 70 that
we had to use the oddball date markers?
#2 - Add a penalty exception for extreme financial hardship
We are not fans of accessing IRA money before retirement. After
all, that's what the account is supposed to be for, right? But
sometimes, people run into tough times that necessitate they dip
into their savings unexpectedly. If you withdraw any of your IRA
funds before age 59 ½, you are generally subject to income tax and
a 10% additional penalty for an early distribution. Unfortunately,
that often means that even when people are in the direst of
situations, and when every last cent counts, they are hit with a
significant penalty merely because they haven't met some arbitrary
age designated by lawmakers decades ago. We believe most people
should do a better job of saving for their golden years, but we also
understand that sometimes "life happens." We think the tax code
should understand that too.
CLICK HERE to read the entire holiday wish list. This article appeared at
The Slott Report (www.theslottreport.com)
on Wednesday, November 28.