16 THE COURIER SUN • FEBRUARY 9, 2017 FOR BREAKING NEWS VISIT www.qns.com tax tips Chapter 13: Tax Considerations JOHN J. CIAFONE, ESQ. MILLION DOLLAR ADVOCATES FORUM THE TOP TRIAL LAWYERS IN AMERICA TM Your Partner in the Struggle For Justice Admitted in NY NJ and Washington DC Attorney At Law 25-59 Steinway Street Astoria, NY 11103 718-278-3900 johnjciafone@yahoo.com Voted Best Attorney from ADVERTORIAL Araneo Tax & Financial 164-46 Cross Bay Blvd, Howard Beach, NY 11414 718-641-0600 • www.araneotax.com The Roth IRA: A Multi-purpose Account By Deanna Blandino A Roth IRA is a retirement account in which you already paid taxes on the money going into your account (your contributions), and from which all withdrawals of principal are tax- and penalty-free. Most people do not realize this, so I will repeat part of it: you may withdraw your Roth IRA contributions at anytime, for any reason, without taxes or penalties. The entire withdrawal (which means earnings as well) could be tax-free, but certain rules apply. You can contribute to a Roth IRA as long as you have earned income. You cannot deduct your Roth IRA contributions as you can with a traditional IRA, but the earnings, if you follow the rules, will never be taxed. There is no limit on the amount of Roth IRA earnings that you can receive tax-free. Many experts say Roth IRAs make the most sense if you expect a higher tax rate during retirement than your current tax rate. While this is true, I personally recommend the Roth IRA as a flexible, multi-purpose account. Let’s say you’re already contributing to a 401(k) or company pension plan, and you feel like you probably have enough going towards retirement. A Roth IRA is a great way to supplement that. It also can be used to save for home-purchase, college education, or as an emergency fund. Call me and we can figure out if a Roth IRA is right for you. Registered Representatives offer securities through Securities America, Inc. Member FINRA/SIPC. Financial Advisors offer advisory services through Securities America Advisors, Inc. Tax services provided through Araneo Tax & Financial. Araneo Tax & Financial and Securities America are unaffiliated. BY JOHN SAVIGNANO Clients who face dire financial circumstances use liquidation, under Chapter 7 of the Bankruptcy Code, to pay off creditors to the extent possible and obtain something of a fresh start. Many individuals have been channeled to Chapter 13, under which a debtor typically pays off a greater amount of the debt through a court-approved repayment plan. The purpose of Chapter 13 is to repay all or a part of the individual debtor’s debts in installments over a three- or five-year period from the debtor’s regular income received while the plan is in effect. CHAPTER 13 VS. CHAPTER 7 In an individual’s Chapter 7 bankruptcy proceedings, the debtor’s nonexempt assets are sold, and the proceeds are distributed to pay all or part of the debtor’s creditors. The focus in a Chapter 7 bankruptcy is on liquidating the debtor’s nonexempt assets to pay creditors, whereas the focus in Chapter 13 case is on the amount of the debtor’s future, regular income available to pay creditors. A debtor does not always have a choice between filing a Chapter 7 or Chapter 13 petition. An individual debtor’s eligibility for filling a Chapter 7 petition is subject to passing a twopart “means test” or otherwise proving that the Chapter 7 petition is not abusive. • A Chapter 7 bankruptcy involves liquidating assets and discharging debts, whereas a Chapter 13 bankruptcy involves paying debts from future income over a set period of time. • The debt relief that a taxpayer can accomplish by filing a Chapter 13 petition is limited. For debtors looking primarily for relief from tax debts, the new repayment landscape may dictate a closer look at other options for addressing federal tax deficiencies. CHAPTER 13 AND TAX DEBTS The debt relief that taxpayer can accomplish by filing a Chapter 13 petition is limited. For debtors looking primarily for relief from tax debts, the new repayment landscape may dictate a closer look at other options for addressing federal tax deficiencies, including pursuing IRS offers in compromise and installment agreements. The tax discharge available under a typical Chapter 13 bankruptcy is now very similar to what can be accomplished through Chapter 7 liquidation. This means it is no longer possible to eliminate trust fund taxes or a debtor’s liability as a responsible officer for trust fund obligations by filing under Chapter 13. Some differences between the reliefs offered in Chapter 13 individual repayment cases and Chapter 7 liquidation cases. For example, a Chapter 7 proceeding will discharge compensatory tax penalties, penalties applicable to nondischargeable taxes, and penalties that relate to taxes accruing more than three years before the petition. In a Chapter 13 case, penalties related to priority taxes listed in 11 U.S.C. sections 507 and designed to compensate for actual pecuniary loss must be paid by the plan in full, in deferred cash payments, but otherwise tax penalties are discharge. A further difference is that, unlike liquidation, a Chapter 13 proceeding can be used to discharge priority taxes paid with a credit card, provided the debtor originally intended to pay the card in full. John Savignano is a partner with Savignano Accountants & Advisors located at 47-46 Vernon Blvd., Second Floor, in Long Island City. For questions, dial 718-707-0955.
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