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This week President Bush signed a new pension relief bill designed to help retirees by eliminating the required minimum withdrawals from their retirement plans. We can foresee many tax advantages that this bill will open up for our clients and people over the age of 70. Most importantly this will buy additional time to rebuild your portfolios after the hit they have taken in the financial markets over the last few months. Lastly it will be free from immediate taxation.

Its important that you seek a professionals advice and make sure you are able to take advantage to reduce your income taxes and alternative minimum tax opportunities in 2009.

Below see what the experts from Cadaret Grant as well as the IRS had to say on these new laws:

The required minimum distribution and pension relief bill allows retirees to avoid making withdrawals from 401(k)s, IRAs, and 403(b)s in 2009. However, seniors over age 70 and a half need to take withdrawals this year by December 31 or face an excise tax of 50% of the amount that should have been withdrawn plus income tax.

Business will also get temporary relief from their pension funding requirements under the pension protection act. Multi-employer pension plans hurt by the stock market decline would not have to make drastic pension plan contribution increases and worker benefit cutbacks that many companies had feared. The new law does not erase the companies’ funding obligations but, given the current economic downturn, does adjust some payment schedules set up under the 2006.

Below is a message from the IRS on the very same law:

The IRS has a Tax Exempt and Government Entities Division, TE/GE. In that Division there is an Employee Plans Compliance Unit (EPCU) that conducts projects from time-to-time.

One of the projects of EPCU is a Minimum Required IRA Distributions project. The purpose of the project is to educate taxpayers, not to penalize them.

The following is some of the information provided by the IRS regarding the IRA project that you should know about:

Employee Plans Compliance Unit Looks at IRA Minimum Distribution Compliance

By Monika A. Templeman, Director Employee Plans Examinations, IRS

The Internal Revenue Service Employee Plans function utilizes the Employee Plans Compliance Unit (EPCU) to conduct compliance checks that allow the Service to “touch” a larger portion of the Employee Plans (EP) universe with minimal taxpayer burden. Compliance checks are limited to a single issue that is usually handled through correspondence. They can be used to determine whether a record keeping or reporting requirement is met or to match information from a return (or information report) to other data to resolve errors and/or discrepancies. They are used to promote compliance and provide education at the same time. Since many questions/problems can be resolved without an audit, using the EPCU leverages resources and significantly increases compliance coverage.

For example, the Individual Retirement Account (IRA) Form 5498 Required Minimum Distributions Project focuses on whether individuals over age 70 1/2 are aware of and are receiving the required minimum distribution (RMD) from their individual retirement accounts. The EPCU contacts individuals to explain the RMD requirements and how to become compliant with the objective to both educate and correct. Over 90% of our IRA Project cases to date have required correction.

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Tags: 401k, 403(b), economic downturn, epcu, ira, minimum distributions project, Monika Templeman, new tax law, personal fiance, retiremement, Sy Goldberg, tax exemption, tax planning, Taxes

About the Author: Sy is a senior partner in the Jericho law firm Goldberg & Goldberg, P.C., is Professor Emeritus of Law and taxation of Long Island University. He has authored guides for the American Bar Association and the America Institute of CPAs on retirement distribution rules. In addition, you may be interested in a consumer’s version entitled “Inherited IRAs: What Your Family Needs To Know” published by JKLasser.com

This entry was posted on Tuesday, December 30th, 2008 at 9:09 pm and is filed under Taxes, ira. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.