Q: Social Security was my only source of income for 2015, is it taxable?
A: In general, if Social Security is your only income source, benefits are not taxable.
Q: I inherited an IRA from my brother who passed away in February 2015 at age 76. He passed away before taking his 2015 RMD so I took it in October 2015. Is the RMD reported on his estate tax return or my 2015 tax return?
A: Your tax return. Year of death RMDs are reported on the recipient’s tax return.
Q: I retired and transferred all of my 401(k) assets, including highly appreciated employer stock, to an IRA last year. I recently discovered that a Net Unrealized Appreciation (NUA) strategy could give me a huge tax advantage. Since I haven’t filed my tax return yet, may I still elect to use an NUA strategy?
A: No. Unfortunately, once you transferred your highly appreciated employer stock to an IRA, the opportunity to use an NUA strategy was permanently eliminated. To preserve an NUA strategy opportunity, among other requirements, the shares must have been transferred in-kind to a taxable account.
Q: I requested my 2015 RMD on December 31st but I just found out from my IRA custodian that I will get a 1099-R for 2016, not 2015…why?
A: The distribution year is determined by the processing date, which may differ from the date you make a request. It is important to know your IRA custodian’s deadline for processing distribution requests. Some custodians require that distribution requests be submitted no later than mid-December to ensure RMD processing satisfies the December 31st deadline. There is a 50% penalty imposed by the IRS for failing to take a timely RMD.
Q: May I deduct losses in my IRA on my 2015 tax return?
A: Generally no, unless you cash out all your IRAs of the same type. Losses and gains are not taken into account on your tax return while your IRA is still open. You may, however, deduct your Traditional IRA losses only if the total balance that you withdraw is less than the after-tax amounts (basis) in your TIRAs. Your basis is attributed to non-deductible contributions and rollovers of after-tax amounts from qualified plans, 403(b) accounts and 457(b) plans. You also must file IRS Form 8606.