Tag Archives: Ron Fatoullah

IRS to crack down on IRA tax rules


| rfatoullah@queenscourier.com


An individual retirement account (IRA) is a form of retirement plan that provides tax advantages for those individuals who set aside savings for their future retirement. Taxpayers can contribute a certain amount each year and reduce their annual taxable incomes by the amount contributed. Further, until the individual IRA owner reaches the age of 70 and a half, the actual contributions to the IRA plus any earned interest grow tax free.

Unless an exception applies, money can typically be withdrawn penalty free as taxable income from an IRA once the owner reaches age 59 and a half. Further, owners must begin taking distributions of at least the calculated minimum amounts by April 1 of the year after reaching the age 70 and a half. The amount that must be withdrawn (the minimum required distribution) is calculated based on a factor taken from the appropriate IRS table and is based on the life expectancy of the owner and possibly his or her spouse as beneficiary, if applicable. At the death of the owner, distributions must continue and if there is a designated beneficiary, distributions can be based on the life expectancy of the beneficiary.

Now is an opportune time for all IRA owners to make sure that they have been complying with tax rules. The Internal Revenue Service (IRS) is going to start cracking down on individual retirement accounts in an effort to collect penalties from taxpayers who do not follow rules regarding maximum contributions and minimum distributions. According to an article in the Wall Street Journal, the crackdown is part of an attempt to collect millions of dollars in previously uncollected penalties.

Individuals are only allowed to contribute a certain amount to regular and Roth IRAs each year. For 2012, one can contribute $5,000 plus an addition $1,000 if over age 50. If an individual contributes more than the allowable amount, he/she may be subject to a penalty of six percent of the excess amount. In addition, if an IRA owner, after having reached age 70 and a half, does not take the required minimum distribution, he/she can be subject to a 50 percent penalty on the amount that should have been withdrawn. The same penalty applies to IRAs that are inherited from another individual. There is no statute of limitations on the penalties, so if errors are made over subsequent years, the penalties can add up quickly.

It is unclear how the IRS will step up enforcement of the penalties. The IRS will report to the Treasury Department in the very near future on its strategies, which could include more paperwork and audits. According to the Wall Street Journal, in 2006 and 2007, the IRS failed to collect $286 million in penalties for missed withdrawals and contributions.

Individuals and financial planners need to look over their IRAs to make sure contributions and withdrawals have been made properly. If any errors are found, they should be corrected immediately because delaying further only increases penalty and interest charges. This should be done in the context of a review of your entire estate plan by an estate planning attorney and a financial advisor.

Ronald Fatoullah & Associates, a law firm concentrating in elder law, estate planning, Medicaid eligibility, special needs, trusts, guardianships, & probate. Ronald Fatoullah is a leading expert in the fields of elder law & estate planning and is the founder and managing attorney of the firm. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer’s Association. The firm’s offices are conveniently located in: Queens, Long Island, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law or 1-877-Estates. This article was written with the assistance of Debby Rosenfeld, Esq., a senior staff attorney with the firm.

Benefits for Veterans


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Veterans with limited income who are permanently and totally disabled or 65 years or older may receive an improved pension. To receipt this benefit, the veteran must have been discharged under other than dishonorable conditions and served 90 days or more of active duty, one day of which was during World War II, the Korean War, Vietnam War or Gulf War. A Veteran Administration’s improved pension has three levels: Basic Pension, Housebound Pension and Aid & Attendance.

The first level is the Basic Pension, for which veterans 65 and older are eligible. The Veterans Administration (“VA”) classifies any veteran who reaches the age of 65 as permanently and totally “disabled.” This classification entitles the veteran or his widow to a Basic Pension. A doctor’s assessment is not necessary to confirm disability.

In order to receive the Basic Pension, the veteran must be financially eligible for the pension after a review of income and assets. The VA must determine that the veteran’s assets, excluding his home, furnishings and vehicles, are not sufficient to support him for his lifetime. A commonly used measure is whether there is $80,000 or less in assets, regardless of whether the veteran is married or single. The current maximum monthly basic pension is approximately $1,201 monthly ($12,255 annually).

The second level of pension is the Housebound Pension. To be eligible for Housebound Pension, the individual need not require assistance with activities of daily living per se, but must require some assistance as confirmed by the veteran’s personal physician. The veteran must have a single permanent disability that is 100 percent disabling and be permanently confined to his premises or have a single permanent disability that is 100 percent disabling and another disability that is 60 percent or more disabling. The maximum housebound pension is $1,248 per month ($14,977 annually). The veteran cannot receive Aid and Attendance and Housebound benefits at the same time.

The highest level awarded is Aid & Attendance. Aid & Attendance is a benefit for veterans and surviving spouses who need assistance with activities of daily living, without which they would not be able to function independently. To qualify medically, a veteran or surviving spouse must need the assistance of another person to perform daily tasks, such as eating, dressing, undressing, taking care of the nature’s needs, etc. Being blind or in a nursing home for mental or physical incapacity, or residing in an assisted living facility also qualifies. The attending physician must certify that the individual’s physical limitations are such that he cannot live independently without assistance. The current maximum monthly Aid & attendance benefit is $1,703 ($20,446 annually).

If Medicaid is covering a nursing home resident’s care, the facility will receive the pension and Aid & Attendance and the resident will receive $90 monthly for his personal needs. Due to the complex nature of benefits for veterans, it is advisable to consult a professional who can provide advice regarding what benefits may be available, and to ensure that the Veteran has his legal house in order.

Ronald Fatoullah is a leading expert in the field of elder law. He is the founder and managing attorney of Ronald Fatoullah & Associates, a law firm concentrating in elder law, Medicaid eligibility, estate planning, special needs, trusts, guardianships, & probate. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer’s Association. This article was written with the assistance of Yan Lian Kuang-Maoga, Esq. Ms. Kuang-Maoga speaks Mandarin and Cantonese and assists with the firm’s Chinese speaking clientele. The firm’s offices are conveniently located in: Long Island, Queens, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law 1-877-Estates.