8 - March 16, 2012 | Salem Community Patriot
Piece of the Pie Maintaining Your
401K or IRA? W.F.Bo
utin EA - Total Tax Solutions LLC
Last week we discussed the benefits of deferred compensation plans such as the 401K. We saw how it affects the income tax return by lowering AGI and taxable income. Matching contribu- tions from an employer increases the value of such a plan. Other benefits of the 401K, not previously mentioned, are the higher contribution caps as opposed to an IRA, $16,500 for 2011 and an additional $5500 as a catch-up amount for taxpayers over 50, (these totals do not include employer contribution.); some employer 401K plans allow for qualified loans which are not taxable (if you should leave the company’s employ before the loan is repaid it can become an early distribution, fully taxable with penalties). Some issues that may be considered a negative are 401K plans only allow distributions in the case of hardship or after age 59 1/2. The penalty on an early distribution is not wavered for education expenses or first time home purchases as they could be with a traditional IRA. The 401K is not very “liquid” when funds are required. Taxpayers who do not wish to “place all of their eggs in one basket” may want to consider the possibility of contributing to both a 401K plan and an IRA.
An IRA has contribution limits of $5000 for 2011 with a catch-up amount of an additional $1000 for taxpayers 50 or older. Contri- butions amounts are limited to earned income. Loans are not permitted on IRA plans. They are more “liquid” because amounts can be withdrawn at any time, however distributions from a Traditional IRA will be fully taxable, unless the IRA contains non-deductible contributions. These distributions will increase the AGI, taxable income and possibly the tax bracket on the tax return. Unless an exception to the penalty applies, such as distributions for qualified first-home purchases or qualified education expenses, a 10% penalty is also imposed on the early withdrawal (the same as with a 401K).
When discussing IRA plans we need to distinguish between the Traditional and the Roth.
Contributions can be made to both plans in the same year, but the total amount contributed cannot exceed the contribution limit or earned income for the year. Contributions to a Traditional IRA may be deductible on the income tax return. Whether it is deductible depends upon income, filing status and if you are already a participant in an employer’s retirement plan. All individuals can always contribute the maximum limit to a
Traditional IRA, providing the earned income rule is met; but if it is not deductible in full on the tax return, taxpayers must keep track of their basis (the non-deductible portion), since it will not be taxable when distributions are taken (Form 8606 is used to keep track of these after tax contributions). Contributions to a Traditional IRA can be made for the current
tax year up to the due date of the income tax return. This is an important tool for taxpayers who owe additional tax on their return. They have the ability to contribute to an IRA and lower their taxable income or tax bracket for the preceding year, providing it is deductible. Distributions from a Traditional IRA are fully taxable on the income tax return. Contributions to a Roth IRA are never deductible. Contributions to a Roth IRA may also be limited based upon your income, filing status and if you contribute to another IRA. With a Roth IRA, a distribution of the contribution amount is never taxable. The earnings may be taxable if certain criteria are not met. This makes the Roth IRA a very attractive tool in financial planning. It may not be deductible, but is very “liquid” for emergency purposes without affecting the tax return income totals.
Next week: TheValue of Fringe Benefits.
Have a tax question? E-mail email@example.com
About Total Tax Solutions: W.F. Boutin EA registered Total Tax Solutions in the State of NH as a LLC in the summer of 2006 after 10 years experience working for a major tax preparation company and 8 years of teaching various tax courses. The company mission is to deliver an excellent customer service experience year around, to offer knowledgeable advice so that clients can make informed decisions regarding their financial future, and to provide this service with integrity, confidence and professionalism.
Salem Town and School Election Results Election of Town Officers
Selectman (2 for 3 years) Carl Swiderski
Ronald J. Belanger James Keller
Everett McBride P. Anthony McKeon
Budget Committee (3 for 3 years) Robert "Bob" Bryant
William P. Carter Dane Hoover Paul G. Huard Paul Welch
Budget Committee (1 for 1 year) Russell Frydryck
Library Trustee (1 for 3 years) Annette M. Cooke
Trustee of Trust Funds (2 for 3 years) Michael Foster
Moderator (1 for 2 years) Christopher Goodnow
Supervisor of Checklist (1 for 6 years) Melissa Sorcinelli
Supervisor of Checklist (1 for 2 years) Betty Irene Gay Patricia Frydryck
Planning Board (2 for 3 years) Paul Pelletier
Edward DeClercq John J. Manning Phyllis O'Grady
Zoning Board of Adjustment (2 for 3 years) Steven Diantgikis
TRAVIS TERRY & CO. Certified Public Accountant Personal, Business, PayRoll & Tax Preparation
Week 8 3-16-2012
FREE Tax Tips at
25 Main Street, Salem, NH 603-898-2511
Septic Systems • Sewer Hook-ups, etc. Gravel • Fill • Loam • Sand
2 Way Radios for Quick Service & Son, Inc.
Residential & Commercial Excavating & Grading
38 SCHOOL ST., SALEM, NH 603-898-2236
dd 1 817
2271 2768 2496 2194
1110 Withdrew 2076 2447 1922 1703
4523 4941 4608 4785 4636
2668 2144 1996 2186
3516 Article 4:
Reference Zoning Map for District Boundaries
Article 5: Change Definition of Abutter
Article 6: Revise Parking Requirements for Restaurants
Eliminate Sprinkler Requirement Article 8:
Add Lot to Depot Village Overlay District
Article 9: Amend Town Building Code
Article 10: Amend Town Fire Prevention Code
Article 11: Amend Town Life Safety Code
Article 12: Adopt the Provision of SB2
Appointed Planning Board Article 14:
Appointed Zoning Board of Adjustment
Article 15: Operating Budget
Public Works Collective Bargaining Unite Contract
Article 17: 98145.451
Salem Public Administrators Employee Collective Bargaining Unit Contract
Firefighter Collective Bargaining Unit Contract
Article 20: Police Collective Bargaining Unit Contract
Non-Bnding Question Curbside Trash and Recycling Pickup
Election of School District Officers School Board (Vote for 2) Pamela R. Berry
Michael J. Carney, Jr. School District Warrant Articles VISIT OUR NEW SHOWROOM Article 2 4/15/08 2:38:14 PM
Fund Sums for Additions & Renovations to Three Schools
Article 3: Operating Budget
Article 4: 17 Hampshire Drive, Unit 15, Hudson, NH
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Sale Dates: Friday, March 9, 2012- Thursday, March 15, 2012
Grade 'A' - Family Pack
CHICKEN LEG QUARTERS .88¢ /lb.
12 Packs - All Varieties 3/$12 12 oz. cans COCA-COLA
FRUIT SALAD $3.19/lb.
CORNED BRISKET $4.33/lb.
USDA Choice - Whole Oven Ready
PORK CHOPS $3.88/lb.
JUICE COCKTAILS 2/$4 64 oz.
Ocean Spray Save $3.58 on 2 Save $2 lb. - Fresh - USA
COD FILLETS $7.99/lb.
CORNED BEEF $3.99/lb.
POINT CUT SALEM, NH • 236 N. Broadway, Rte. 28 STUFFED Bone In - USDA Choice
STRIP STEAK $9.99 /lb.
ICE CREAM $2.99 1.5 qt.
Friendly’s Save $1
SEAFOOD CAKES $2.99 4 oz. ea.
GERMAN BOLOGNA $1.88/lb.
Wunderbar Hansel 'n Gretel - Virginia
HONEY HAM $3.49/lb.
Grade A - Family Pack CHICKEN
Fund Increase for Teachers Article 5:
Fund Increase for Secretaries Article 6:
Fund Increase for Assistant Unit Members Article 7:
Fund Increase for Custodians Article 8:
Fund Increase for Food Service Personnel Article 9:
Interest Earnings on Investment of $14,506 in Bonds
Discontinuance of Beede Waste Oil Expendable Trust Fund
4297 1951 3658 3685 3563 3739 3859 3936 2863 2777 2886 2809 2587 2395 3654 4041 2928 2370 1466 5353
Wednesday O Fresh - Cana
3641 3541 2729 2819 3224 3062 4022 3466 2297 2863 1885 2336 4067 3980 3646 2087 3834 4342 2679 2548 2367 4342 2236 1430 3241 3414 3489 1577 4354 2668 1316 3272 3928 1705 Gary Azarian
Zoning Board of Adjustment (1 for 2 years) Bernard W. Campbell
Town Warrant Articles Article 2:
Revise Limited Community Shopping Village District Regulations
Article 3: Clarify Wetland Buffer
Town Warrant Articles 3748 4069 Yes 1330 1865 No 3735 4487 Yes No
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