written by Blair Groves
There are a number of important tax developments in the second quarter of 2014. The following is a summary of the most important developments that have occurred in the past three months that may affect you.
No bankruptcy exemption for inherited IRAs
In bankruptcy, there are certain assets that are considered exempt, or out of the reach of creditors. These exemptions provide for protection of retirement funds and IRAs to protect people in their retirement years. On June 12th, The Supreme Court unanimously held that inherited IRAs do not qualify for such an exemption because funds held in them are not true retirement funds.
However, the term “inherited IRA” doesn’t include amounts inherited by the spouse of the decedent. This Supreme Court decision should be taken into account when selecting IRA beneficiaries. If a potential beneficiary is under financial distress, the IRA owner should consider naming a trust as beneficiary instead. The individual could be named as beneficiary of the trust without jeopardizing the full IRA funds if he or she personally goes bankrupt.
More enforcement of responsible person penalty likely
If an employer does not properly pay over its payroll taxes, the IRS can seek to collect a trust fund recovery penalty equal to 100% of the unpaid taxes from the person who is responsible, but willfully fails to do so. The Treasury Inspector General issued a report that found the IRS has often not taken adequate and timely actions assessing and collecting this penalty. The IRS has agreed to implement recommendations, making enforcement of the penalty more likely.
For more information regarding these developments, please contact us at 417-881-0145.