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STRATEGIC
ISSUES...ONLINE
For week of October 24, 2005, Issue #234
Featured Articles:
1. Avoiding the Rollover
Trap
2. Focus on Fraud:
Corporate & Identity Theft - Part 2
3. Tech Tip Weekly:
Understanding the Standard Chart Types
4. Mark Your Calendars!
1. Avoiding the Rollover
Trap
If you have decided to roll over your
balance in one IRA into another IRA or have changed jobs and need to
move the balance in your 401(k) plan into an IRA, the rules will allow
you to make these kinds of rollovers without paying taxes. However, if
you do this the wrong way, you could end up scrambling for cash.
One key rule is that you have 60 days to
complete a rollover. So you could withdraw funds from an IRA or a
401(k) plan, take your time to look around at alternative IRAs, then
reinvest in your chosen plan. If you reinvest the same amount within 60
days, you won't owe tax on the original distribution.
But there's a catch. When you receive a
distribution, the trustee of the plan must withhold taxes at a 20%
rate. For example, if you withdraw $10,000, you'll receive a check for
$8,000 after withholding. But within 60 days, you'll need to reinvest a
full $10,000 if you're to avoid taxes on the rollover.
Unless you can come up with the extra
$2,000, you won't be able to roll over the full amount and part of the
distribution will be taxable. Of course, if you do reinvest the full
$10,000 you can claim a refund of the $2,000 withheld, but that won't
happen until you file your next tax return.
Avoid this trap by always asking for a
"trustee to trustee" rollover. In this case, the funds are transferred
automatically between the old and new plan, and you never have control
of the money. The other advantage is that there's no danger of missing
the 60-day deadline by mistake.
Other rules apply to IRA and 401(k)
rollovers. We encourage you to check with us to make sure you avoid any
tax traps.
2. Focus on Fraud: Corporate
& Identity Theft - Part 2
What is an "Identity"?
The term "identity" is often used carelessly
and without preciseness or exactness.
"Identity theft" and "Identity crime" are
often used interchangeably, incorrectly.
Webster's New World Dictionary - "identity"
is the state or fact of being a specific person or thing; individuality,
the state of being as described.
Traditionally, one's name, occupation, etc.
Contemporarily, including Social Security
number, financial accounts, consumer and credit histories, and in many
ways more of an IT nature.
And, "identity theft" usually qualified to
an individual's personal identifying information, is evolving to also
include "business identity theft".
"Child identity theft" has now evolved from
the assignment of SSNs at birth; and has become a subset of "personal
identity theft".
Part 3 next week.
3. Tech Tip Weekly:
Understanding the Standard Chart Types
MS Excel provides several chart types to use
for displaying data. You can select a chart type when using the Chart
Wizard to create a chart, or when the Chart Type dialog box is displayed
while editing an existing chart.
The standard chart types are summarized
here.
-Bar, Column, Cone, Cylinder,
Pyramid: Use to compare items.
-Area, Line, Stock, Surface: Use to
show change over time or category
-Doughnut, Pie: Use to analyze
components of an entity
-Bubble, Radar, XY (Scatter): Use
to display relationships, dependencies, and correlation among sets of
data.
Different chart types are used to display
different facts about data. There is an art to selecting the right type
of chart. How many series are in the data? Does one series correlate
to another? (For example, does a drop in temperature cause more
fractured ankles?) Do you need to emphasize the dominant factor of a sum
of items?
An incorrect chart type can produce a
great-looking chart and yet still not display the correct information.
4. Mark Your Calendars...
...for Tuesday, November 8 for the 13th
Annual In-House Accountants Update Seminar.
The seminar will be held from 8:30 a.m. to 11:00 a.m. at Prangley
Marks, LLP.
Some of this year's topics include:
-Retirement Planning
-Fraud and Anti-Fraud Update
-Independent Contractor Issues
-And Many More!
Please RSVP to Amy at acarroll@pmcpa.com
no later than Wednesday, November 2nd. A continental breakfast will
be served!
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