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Week of January 16, 2009 • Issue No. 030
This Week in the iNews:
▲ RMD SUSPENSION CREATES PLANNING OPPORTUNITIES
▲ FOCUS ON FRAUD: BUSINESS COMPUTERS ARE ALWAYS AT RISK … ESPECIALLY FROM EMPLOYEES
▲ NEW LUNCH & LEARN DATES FOR 2009 – MARK YOUR CALENDARS!
▲ RMD Suspension Creates Planning Opportunities
Congress’s recent suspension of required minimum distributions (RMDs)
for 2009 from IRAs, 401(k) plans and similar arrangements creates new
planning opportunities. You do not have to take money out of a plan
due to the suspension of RMDs in the Worker, Retiree and Employer
Recovery Act of 2008. There are several planning strategies, such as
harvesting losses, Roth IRA conversions and other techniques to
maximize the benefits of suspending RMDs for 2009.
Despite calls from lawmakers for the Treasury Department to
retroactively suspend RMDs for 2008, no 2008 relief was passed.
However, President-elect Obama urged the Treasury Department to
suspend RMDs for 2008. Obama could take executive action after January
20.
Generally, RMDs are calculated by dividing the prior December 31st
balance of the IRA or retirement plan account by a life expectancy
factor provided by the
IRS. One year
deferral out of an IRA generates a variety of planning opportunities,
especially for affluent individuals who do not need to take RMDs for
daily living expenses. Also, keeping the money deferred will create
and generate more wealth.
Individuals, including beneficiaries, who are not required to take
RMDs in 2009, should consider their investment and retirement goals,
their marginal tax rates and their age when contemplating a strategy.
The new law suspends RMDs not only for seniors but also for
beneficiaries in certain situations.
Suspension of RMDs also invites individuals to consider the advantages
of a Roth IRA. In 2010, the $100,000 Roth adjusted gross income (AGI) limitation disappears. Everyone will be eligible for a Roth
conversion.
Individuals also may have passive activity losses they cannot deduct
because of their RMDs and itemized deduction and exemption limitations
caused by the
higher AGI. Higher AGI
also causes more of your social security benefits to be taxed.
The new tax act also makes another very significant change related to
plans and plan beneficiaries. The new law makes the non-spouse
rollover provision mandatory. This is a key benefit and
provides an important tax deferral opportunity for non-spouse
beneficiaries. Although many employers have been allowing non-spouse
beneficiary rollovers beginning in 2007, many had not focused on this
change given all of the other plan administration changes that
resulted from the Pension Protection Act.
▲FOCUS ON FRAUD: BUSINESS COMPUTERS ARE ALWAYS AT RISK … ESPECIALLY FROM EMPLOYEES
There are firewalls and encryption to protect a business’s computer system from outside predators, but do you guard against the fox that’s already in the henhouse? Employee computer crime is a real threat, and must be considered in a fraud prevention program.
No skills required – Internal computer fraud can include any of a number of wrongdoings, from illegally copying software to stealing trade secrets to outright theft of company equipment. It can occur at any point in the system from data input, software, data storage or data output.
Be a culture vulture – The problem is that employees must use the system to keep the business going. And to do that effectively, they must know how the system works. The challenge, therefore, is to give employees all the knowledge they need to perform their jobs and, at the same time, prevent them from using it against the business.
One way to do this is to create and maintain a business culture that’s hostile to fraud by:
Identifying areas of the greatest risk,
Creating ethics policies,
Stressing integrity at all levels of the organization, and
Ensuring that all employees are effectively supervised.
In addition, when employees are trained in computer usage, they need to be instructed in security and fraud prevention as well.
Take control – More practically, there must be a strong internal control system for the organization’s IT network. At its most basic, this means segregating duties and restricting access to system resources. But also servers must be monitored along with back-ups, e-mails and internet activities. Employees may experience a small loss of privacy, but they are the company’s computers and networks, and the organization has the right to protect them.
More next time on the most important strategy to protect against computer fraud, locking the back door, and recognizing a real threat.
If you have questions about computer fraud, please call our office. We will be happy to respond.
▲NEW LUNCH & LEARN DATES FOR 2009 – MARK YOUR CALENDARS!
Please join us for the 2009 installments of our monthly Lunch & Learn Series Programs for 2009. Each program will begin at noon and end around 1:00p.m. Lunch and parking will be provided.
· Tuesday, February 17, 2009 – Tax Planning Under President Obama
· Thursday, March 19, 2009 – Financial Planning in Today’s Environment from a CPA’s Perspective
· Tuesday, May 19, 2009 – TBA
· Thursday, June 18, 2009 - Managing the Business Risk of Fraud: A Practical Approach
Please contact Michelle Ripley at mripley@pmcpa.com or at 616.774.9004 for your reservation for any of the programs.
Seating is limited. Don’t miss out!