First and foremost, don’t take a lump-sum distribution from your old employer’s retirement plan. It generally will be taxable and, if you’re under age 59½, subject to a 10% early-withdrawal penalty. Here are three alternatives:

1. Stay put. You may be able to leave your money in your old plan. But if you’ll be participating in your new employer’s plan or you already have an IRA, keeping track of multiple plans can make managing your retirement assets more difficult. Also consider how well the old plan’s investment options meet your needs.

2. Roll over to your new employer’s plan. This may be beneficial if it leaves you with only one retirement plan to keep track of. But evaluate the new plan’s investment options.

3. Roll over to an IRA. If you participate in a new employer’s plan, this will require keeping track of two plans. But it may be the best alternative because IRAs offer nearly unlimited investment choices.

There are additional issues to consider when deciding what to do with your old retirement plan. We can help you make an informed decision — and avoid potential tax traps.

The passing of Memorial Day marks the beginning of summer in the minds of many Americans. Although the kids might still be in school for another week or two, summer day camp is rapidly approaching for many families. If yours is among them, did you know that sending your child to day camp might make you eligible for a tax break?

Day camp is a qualified expense under the child and dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2014, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more.

Be aware, however, that overnight camp costs don’t qualify for the credit.

Additional rules apply, so please contact us to determine whether you’re eligible.

If you’re considering donating a property to charity, here are three potential tax traps you need to be aware of:

1. If you donate real estate to a public charity, you generally can deduct the property’s fair market value. But if you donate it to a private foundation, your deduction is limited to the lower of fair market value or your cost basis in the property.
2. If the property is subject to a mortgage, you may recognize taxable income for all or a portion of the loan’s value. And charities might not accept mortgaged property because it may trigger unrelated business income tax for them.
3. If the charity sells the property within three years, it must report the sale to the IRS. If the price is substantially less than the amount you claimed, the IRS may challenge your deduction.

These are only some of the traps that could reduce the tax benefit of your real estate donation. Please contact us to help ensure that you avoid these and other traps.

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Health care Flexible Spending Accounts (FSAs) allow employees to redirect pretax income to an employer-sponsored plan that pays, or reimburses them for, qualified medical expenses not covered by insurance. A maximum employee contribution limit of $2,500 went into effect in 2013. (Employers can set a lower limit, however, and there will continue to be no limit on employer contributions to FSAs.)

Employers that haven’t yet done so must amend their plans and summary plan descriptions to reflect the $2,500 limit (or a lower one, if they wish) by Dec. 31, 2014.

While you’re making those amendments, you may want to consider another amendment: allowing a $500 rollover.

Generally, an employee loses any FSA amount that hasn’t been used by the plan year’s end. But last year the IRS issued guidance permitting employers to amend their FSA plans to allow up to $500 to be rolled over to the next year. However, if your plan was previously amended to allow a 2½-month grace period for incurring expenses to use up the previous year’s contribution, you cannot add the rollover provision unless you eliminate the grace period provision.

Questions about amending your FSA plan — or adding FSAs to your benefits offering? Then contact us; we’d be pleased to answer these and other questions related to taxes and employee benefits.

Are you thinking about turning a business trip into a family vacation this summer? This can be a great way to fund a portion of your vacation costs. But if you’re not careful, you could lose the tax benefits of business travel.

Generally, if the primary purpose of your trip is business, then expenses directly attributable to business will be deductible (or excludable from your taxable income if your employer is paying the expenses or reimbursing you through an accountable plan). Reasonable and necessary travel expenses generally include:

• Air, taxi and rail fares,
• Baggage handling,
• Car use or rental,
• Lodging,
• Meals, and
• Tips.

Expenses associated with taking extra days for sightseeing, relaxation or other personal activities generally aren’t deductible. Nor is the cost of your spouse or children traveling with you. During your trip it’s critical to carefully document your business vs. personal expenses. Also keep in mind that special limitations apply to foreign travel, luxury water travel and certain convention expenses.

For more information on how to maximize your tax savings when combining business travel with a vacation, please contact us. In some cases you may be able to deduct expenses that you might not think would be deductible.