May 10, 2019
Tax Tip: Check On Your Refund and Verify Your Withholding Amount
Here are two particularly useful links to the IRS website:
- Where’s My Refund?: Instead of calling the IRS and waiting on hold, use this. It’s by far the best way to check on your refund status.
- Withholding Calculator: Even if little has changed in your own life, it’s prudent to see whether you need to adjust your paycheck withholding amount for the new tax year. It could help avoid or minimize an unexpected outcome in 2020.
As always, if you have questions about planning for taxes or any other financial matter, please give us a call at 203-967-2231.
Finding the ‘Goldilocks’ Retirement Plan
Where do you set aside the money you’re saving for retirement? If you’re like many Americans, you save for retirement primarily through an employer’s retirement plan, according to Pew Research.
Unfortunately, less than one-half of private sector employers sponsor retirement plans. Firms that have plans tend to be large.
In part, that may be because of a misperception among smaller employers. Many small companies think sponsoring a retirement plan is too expensive. However, 45 percent of smaller employers have never researched retirement plans and just 23 percent have researched any options other than 401(k) plans, reported the 2018 Millennium Trust Small Business Retirement Survey.
The fact is there are workplace retirement plan options developed specifically for smaller employers. These include:
- Savings Incentive Match Plans for Employees (SIMPLE) IRA Plan. Employers with fewer than 100 employees that have no workplace retirement plan can sponsor SIMPLE IRA Plans. They’re easy to administer, salary reduction plans that have no filing requirements.
While there are exceptions, generally, all employees who were paid $5,000 or more during any two preceding calendar years, and who are expected to receive $5,000 or more during the calendar year, are eligible to participate. Employees decide if and how much to contribute. Contributions are made to IRA accounts, which are subject to the same investment, distribution, and rollover rules as Traditional IRAs.
Employers must make either a matching contributions or a non-elective contribution to employees’ accounts each year. Employer contributions to SIMPLE Plans may be deductible.
The pros and cons, according to the IRS, for SIMPLE Plans include:
- They are easy and inexpensive to set up and operate.
- Employees share responsibility for their retirement preparations.
- No discrimination testing is required.
- Employer contributions are inflexible.
- The plan has lower contribution limits than some other retirement plans.
In addition, employers may be able to claim a tax credit equal to 50 percent of eligible startup costs, up to a maximum of $500 per year, for the first three years of plan operation.
- Simplified Employee Pension (SEP) IRA Plan. Employers of all sizes can put a SEP Plan in place. Like SIMPLE Plans, they’re easy to administer, salary reduction plans that have no filing requirements.
While there are exceptions, typically, any employee who is 21 or older, has worked for the company during three of the previous five years, and been paid $600 or more, may be eligible to participate.
Employers make all contributions to SEP Plans. When employers choose to make contributions, they must contribute the same percentage of compensation to every employee’s IRA account. Employer contributions to SEP Plans may be deductible.
The pros and cons, according to the IRS, for SEP Plans include:
- They are easy to set up and operate.
- They have low administrative costs.
- Employer contributions are flexible because the employer chooses when to contribute.
- Employers must contribute equally for all eligible employees.
Again, employers may be eligible for a plan start-up tax credit.
- Payroll Deduction IRA Plan. This may be the simplest workplace retirement plan option. There are no plan documents and no filing requirements. All the employer is required to do is transmit the authorized amount to IRA accounts that have been established by employees.
Employees make all contributions to payroll deduction IRA Plans. Each employee is also responsible for choosing the financial institution and establishing the IRA account that will receive contributions.
The pros and cons, according to the IRS, for IRA Payroll Deduction Plans include:
- They are easy to set up and operate.
- There is little administrative burden or cost.
- Employees may not perceive the plan to be a benefit.
- There is no deduction for the business.
- Employees may or may not be able to deduct their contributions.
If you own or work for a small business that doesn’t currently provide employees with a way to save for retirement, a 401(k) plan is not the only option. If retirement is on your mind, it may be a good idea to educate your employer about the retirement plan options available to small businesses.
You also can save on your own in an Individual Retirement Account (IRA). It’s surprising when so many people are concerned about retirement, but relatively few American households (15 percent) contribute to IRAs outside of work.
If you don’t have a workplace plan, setting up an IRA and automatically transferring funds from a checking or savings account is a good way to save for the future.
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
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- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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