Author: Leon Clinton

Tax

Traditional IRAs vs. Roth IRAs

Two types of IRAs are available to fund your retirement: Traditional IRAs and Roth IRAs. While both are subject to many of the same rules there are several important differences. It’s important to understand these differences because the type of individual retirement account (IRA) you choose can significantly impact your financial future and that of your family.

Who Can Contribute to an IRA?

Any person with income from wages or self-employment can contribute to an IRA (either traditional or Roth)–including children as long as they meet the income conditions. Individuals can contribute up to $5,500 in 2017. A catch-up contribution of $1,000 is allowed for anyone over the age of 50, for a total contribution of $6,500. Contributions are also allowed for stay-at-home spouses (up to $5,500 in 2017) as long as the couple’s wages or self-employment earnings total at least $11,000.

Note: You cannot contribute to a traditional IRA if you are age 70 1/2 or older even if you (or your spouse, if filing jointly) have taxable compensation. You can, however, make contributions to your Roth IRA after you reach age 70 1/2.

Income Limits

A traditional IRA does not have income limits; however, contributions to a Roth IRA might be limited based on your filing status and income.

For example, in 2017, if you file a joint return with your spouse, you cannot contribute to a Roth IRA if your income (AGI or adjusted gross income) is more than $196,000. However, you may be able to contribute a reduced amount if your income is greater than $186,000 but less than $196,000. For income below $186,000, you may contribute up to $5,500 ($6,500 if age 50 or older) or your taxable compensation for the year if your compensation was less than this dollar limit. To figure the reduced amount you can contribute, use the worksheet in Publication 590-A, Contributions to Individual Retirement Accounts (IRAs). Please call if you need assistance figuring this out this amount.

Tax Treatment

Taxable Income

Contributions to a traditional IRA are made pre-tax. As such, they lower your taxable income, which could enable you to take advantage of tax breaks you might not otherwise qualify for with a higher income.

Contributions to Roth IRAs are made after-tax (i.e. you’ve already paid the tax) and do not lower your pre-tax income. Unlike a traditional IRA, however, you will owe no tax on income from withdrawals made during your retirement.

Withdrawals before Age 59 1/2

Withdrawals from a traditional IRA that are made before the age of 59 1/2 are subject to an early withdrawal penalty. There are, however, several exemptions that allow you to use the funds but waive the penalty. These include: Using IRA funds to purchase your first home (up to $10,000) and using funds to offset qualified higher education expenses, health insurance premiums while unemployed, and unreimbursed medical expenses in excess of 10 percent AGI.

Withdrawals from Roth IRAs may be taken out penalty and tax-free before age 59 1/2 as long as they are contributions (not earnings). Withdrawals that are earnings are subject to the same 10 percent penalty tax as traditional IRAs. There is an exception for qualified first-time home-buyers: A maximum of $10,000 of Roth IRA earnings may be withdrawn penalty-free to pay for qualified first-time home-buyer expenses as long as at least five tax years have passed since your initial contribution.

Withdrawals after Age 59 1/2

Once you reach age 59 1/2, you may begin taking distributions. While you are not required to take distributions at this age, you must start taking distributions by April 1 following the year in which you turn age 70 1/2 and by December 31 of later years. With a traditional IRA, any deductible contributions and earnings that are withdrawn (typically referred to as distributions when you retire) are considered taxable income. Income from Roth IRA distributions is generally tax-free and unlike a traditional IRA, there is no age requirement for distributions from a Roth IRA.

Questions about IRAs? Don’t hesitate to call.

Tax

Tax Due Dates for August 2017

August 10

Employees Who Work for Tips – If you received $20 or more in tips during July, report them to your employer. You can use Form 4070.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2017. This due date applies only if you deposited the tax for the quarter in full and on time.

August 15

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in July.

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in July.

Quickbooks

How to Keep Your QuickBooks Data Safe

Your QuickBooks company file contains some of the most sensitive information on your computer. You may have customers’ credit card numbers and employees’ Social Security numbers. An intruder who captured all that data could create tremendous problems for you and a lot of other people.

That’s probably the worst-case scenario. But other situations could also spell disaster for your business, which involves losing your company data through fraud, hacking, or simple technical failures.

The importance of protecting your QuickBooks company file, especially your customer and payroll information, cannot be overstated. Whether someone steals it or it’s inaccessible for another reason, it’s gone. Keeping your business going after such a loss would be very difficult – maybe even impossible. The tips below should help prevent that from happening.

Internal Safeguards

No business owner wants to believe that his or her employees could use their QuickBooks access to commit fraud. But it happens. Your company file contains credit card and checking account data that could be used for nefarious purposes. As we discussed last spring, you can restrict user access to specific areas and actions of QuickBooks.


Figure 1: You can limit your employees who have QuickBooks access to certain areas and activities.

To get started, open the Company menu and select Set Up Users and Passwords | Set Up Users. The User List window opens. It should have at least one entry there, for you (Admin). Click Add User and enter the employee’s name and password in the next window that opens, and then click Next.

Tip: Your QuickBooks license limits you to a specified number of users. If you’re not sure how many you’re allowed, click F2 to open the Product Information page. The number of user licenses that you’ve paid for appears in the upper left.

On the next page of this wizard, click the button in front of Selected Areas of QuickBooks. The following screens will let you define that employee’s access permissions in areas such as Sales and Accounts Receivable, Inventor, and Payroll and Employees. When you’ve clicked through every screen and reviewed the summary displayed, click Finish. Your user will now be able to sign in and access the areas you specified.

You can–and should–take numerous other steps to keep your QuickBooks data safe. If your company is big enough to have a dedicated IT expert, he or she will handle most of this. But there’s a lot you can do on your own to prevent data loss and theft.

Keep Your Operating System and Applications Updated


Figure 2: Don’t ignore this dialog box.

Software companies’ occasional updates offer more than just adding new features and fixing bugs. They sometimes refresh your software to ensure greater security based on new threats. Don’t forget about those all-important antivirus and anti-malware applications, as well as QuickBooks itself.

Keep Your Networks Safe

Just as a cold virus spreads around your office, so too, can unwanted intrusions like computer viruses. Don’t allow an electronic epidemic to get started; take these steps ahead of time to prevent it:

  • Discourage employees from excessive web browsing. This can be a hard rule to enforce, as some employees probably need internet access for research, timecard entry, and other work-related tasks. Create a firm policy legislating what workers can and can’t do on company-issued equipment (including tablets and smartphones) or any personal devices that use your wireless network.
  • Ask employees to refrain from using public networks on work equipment. Enforce the rules vigorously, and make compliance an element of performance evaluations.
  • Minimize app installations on business smartphones. Employees should ask for approval. Viruses and malware get in that way, as well as through some websites and email attachments.
  • Use monitoring software. If you can’t afford to pay for “managed IT” (a la carte, third-party IT services), install an application that alerts you to problems.

Use Common Sense

You can fight data loss and theft by being cautious. Be diligent about backups, and if you create them on a local, portable device, don’t leave them in the office; cloud-based storage is a better solution. Shred papers that have sensitive information on them. Log out of QuickBooks when you’re not using it or when you leave your office. Be aware of who may be around you, looking over your shoulder.

Data security is a serious matter. Don’t hesitate to call if you are at all concerned with your own data safety.

Tips for posting on social media

Concerned about the safety of your QuickBooks data when posting on social media? Find out what security measures you can take by calling the office today. If you lose your QuickBooks data and you’ll face serious consequences, so make sure you keep backups in a safe place.

Do you issue smartphones to employees? Make sure they’re not used on public networks.

Finally, even if you don’t have an IT specialist, you can still protect your QuickBooks data from viruses and malware. Call today and find out how.

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