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1 Page 1 of 6 Having trouble viewing this ? Click here Volume 10 - Issue 2 December 2013 This Issue: Top Reasons to Buy Stocks in 2014 Top Reasons to Buy Stocks in 2014 In-Kind RMD Distribution 50% RMD Penalty The Affordable Care Act and how it may affect you and your employees Important Financial Dates December 15 Pay Federal 4th qtr. estimated taxes (corporations) December 31 State estimated taxes should be paid (to take deduction) Company Retirement Plans must be established and should be funded 1. US economy is poised for its fourth consecutive year of GDP and profit growth. The Euro Zone is exiting recession. Japan stimulus and continued growth in China. 2. Stocks will benefit from global growth and bond prices will decline as the Fed begins to taper its bond buying. 3. Monetary policy will remain accommodative with little chance of the Fed raising interest rates before Stock prices are a function of earnings and P/E ratios. Inflation is flat. P/E multiples are around 15 and should expand to around 16 or Stocks remain under owned by households and pension funds at 30% compared to 53% in Stocks are attractive at a P/E compared to the 10 year US Treasury currently at a 2.86% yield relative to their historic average of 6%. 7. Dividends contribute about 40% of a market's total return. The current dividend payout ratio is around 30% compared to the average 60% ratio. There is plenty of upside potential. 8. The stock market likes gridlock thanks to our incompetent friends in Washington. The 2014 midterm election promises more of the same with little or no change in policies.

2 Page 2 of 6 January 15 Federal 4th qtr. estimated taxes should be paid Tax organizers mailed to clients January 31 W 2 forms & 1099 forms must be sent out 4th qtr. payroll tax returns due 940 FUTA annual due 9. Investor sentiment is rising as is confidence and as companies increase their market share and enter new markets. Balance sheets have never been stronger. 10. With global growth and the interest rate structure, stocks should outperform cash and bonds. It is recommended investors should dollar cost average with new money going into the market to minimize risk. There is risk to being in the market. But, also there is risk being out of the stock market. February 15 February 29 Employers file W2/W3 forms & 1099 forms March 15 File Corporate returns or extensions April 15 File Personal, Partnership, Trust/ Estate returns or extensions Federal 1st qtr. estimated taxes due April 30 1st qtr. payroll tax returns due May 15 All Non-Profit Entity tax returns are due In-Kind RMD Distribution It's that time of the year again to make sure that you have taken your RMD (Required Minimum Distribution) to avoid the 50% penalty. Most people believe they have to take cash or a check out of their IRA. But this is not the only vehicle available. The IRS will allow you to take non-cash distributions from certain IRAs known as property distributions or "In-Kind" distributions. Let's say you are older than 70 ½ and are required to take a $10,000 RMD. You could ask your custodian to distribute $10,000 of property to you. This could be advantageous for you. Let's say you have a stock in your IRA that has gone down quite a bit but you think it will rebound in the future. If you sell the stock inside the IRA and take a check, you'll never see that stock rebound. Instead, consider having the custodian distribute $10,000 worth of that stock to you. The stock will be distributed out of the IRA "In-Kind" (intact) to you and must be valued at the fair market value on the date of distribution. You still own the shares and can keep them in a regular brokerage account. The custodian will issue you a 1099R to be reported on your Don't wait until the absolute end of the year because the custodian will need time to do a valuation and execute the transfer. If you miss the deadline you will be hit with the 50% penalty plus interest.

3 Page 3 of 6 FREE Rollover Helpline Now the hidden secret, as most of you know, all IRA distributions are fully taxed at ordinary income rates. When the "In-Kind" stock in your brokerage account rebounds and you decide to sell, you have two positives to minimize your income taxes. First of all, you now have a basis for your stock of the RMD value. Second, when you go to sell, it is taxed at a 15% capital gain rate if you have held it more than one year. If your ordinary income tax marginal rate is say 28% or 31% or 35%, you have saved over half of your taxes, plus the RMD basis. This is quite simple and effective. Call us at Quest if you have questions or need help. Our telephone number is (888) We look forward to hearing from you. 50% RMD Penalty Yes, you read the title correctly. There is a 50 % penalty that you owe the IRS if you miss or under state the amount you are required to withdraw from your IRA. The RMD (Required Minimum Distribution) is what you must take as taxable income once you reach 70 ½ or older. The calculation is relatively simple. Divide the IRA balance on the prior December 31 st by the appropriate division in the Uniform Life Expectancy Table. As an example, assume you had a $100,000 balance in your IRA on 12/31/12. At age 70 ½ the appropriate divisor is 25. $100,000/25 would require you to take $4,000 for this year. This is how our wonderful administration in Washington wants to increase your taxes to pay for all the entitlement programs. All of your IRAs can be grouped together for a total sum, and you can take the calculated RMD from just one account if you wish. Now, if somehow you missed taking your RMD in one or more years, the IRS will fine you 50% of the minimum amount for each year you missed. Yes that is correct, for each year. As an illustration of the above example, if you are 75 and just found out you missed the RMD for age 70 ½, you would owe $14,000. That amount is composed of the original $4,000 RMD you should have taken plus five years of the $2,000 50% penalty for your failure to comply with the law.

4 Page 4 of 6 Now the good news in some situations, if you know the remedy. Before 2007, the taxpayer was required to pay 100% of the penalty before applying for abatement. The following steps are recommended to fix the problem as the IRS never goes away and this will follow you to your grave if left unresolved. The administration wants its share of your wealth. 1. Get current 2. Take separate IRA withdrawals for each year to obtain the waiver. 3. File Form 5329 for each relevant year. On Line 50 enter RMD that was required to be taken On Line 51 enter total distributions taken or enter "0" and write "RC" (reasonable cause). If you put a $ amount you will lose any hope of a waiver. The IRS will assess the penalty and start sending notices. On Line 53 enter "0" 4. Submit a letter explaining the shortfall for each Form Your explanation might mention illness, a death in the family, a custodian failure to send notification of RMD, or a change of address that the taxpayer did not receive communication from the IRA custodian. If you follow the above road maps and the IRS accepts the reasonable cause, you will receive a notice from the IRS in a few months. If the IRS doesn't accept the "reasonable" test, you get a bill for the 50% penalty plus interest. Good luck. If you need help, contact us at (888) The Affordable Care Act and how it may affect you and your employees by Christine Kelly-Kim

5 Page 5 of 6 The Affordable Care Act, also known as "Obamacare", made major changes to health care reform. There are too many changes to cover in one article so I will cover just a few today. SHARED RESPONSIBILITY FOR INDIVIDUALS The shared responsibility for individuals is better known as the penalty for a taxpayer who does not have minimum essential health insurance coverage. This begins in January 2014 unless repealed. If you have a gap in minimum essential health insurance coverage of more than 3 months you will be charged a penalty on your tax return in 2014 of $95 or 1% of income (divided by the months you did not have coverage). So, if your MAGI (Modified Adjusted Gross Income) is $150,000 a year you will be subject to a penalty of $1,500 for the year or 1/12 of $1500 for each month you didn't have minimum essential coverage. That doesn't sound so bad until you get to 2015 when it becomes the larger of $325 or 2% of income. In 2016, the penalty becomes $695 or 2.5% of income. For the taxpayer with income of $150,000 that is a penalty of $3,750, ouch! SMALL EMPLOYERS MAY BE DOING EMPLOYEES A DISSERVICE BY OFFERING HEALTH INSURANCE TO EMPLOYEES: A small employer is an employer who employed an average of less than 50 full-time employees on business days during the preceding calendar year. If an employee has income of less than 400% of current Federal Poverty Guidelines as listed below they will receive a credit on a sliding scale which limits a taxpayer's health insurance cost to a percentage of household income. It limits the cost for premiums to 2% to 9.5% of income. As you can see from the table below, the credit applies to both low income and middle income individuals and families. There are many reasons that employers would want to provide insurance to employees so it depends on your individual tax situation. If you feel that this may affect you and your business, it is important for you to sit down with us to discuss it before the new year. 2013POVERTY GUIDELINES FOR MASSACHUSETTS Poverty guideline for families/households with more than 8 persons, add $4,020 for each additional person.

6 Page 6 of 6 FAMILY FEDERAL 400% SIZE POVERTY FPL LEVEL 1 $11,490 $45,960 2 $15,510 $62,040 3 $19,530 $78,120 4 $23,550 $94,200 5 $27,570 $110,280 6 $31,590 $126,360 7 $35,610 $142,440 8 $39,630 $158,520 The Compass is produced by Quest Financial Services, Inc. for the benefit of its clients. Although the information herein is gathered from reliable sources, readers should not act upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Quest Financial Services, Inc., Lynnfield Office Park, Building 2, 40 Salem St., Lynnfield, MA Tel: Fax: info@questfsi.com Website: Robert Dubee Robert Dubee Quest Financial Services, Inc. Forward This was sent to info@questfsi.com by info@questfsi.com Update Profile/ Address Instant removal with SafeUnsubscribe Privacy Policy. Quest Financial Services, Inc. 40 Salem Street Building 2, Suite 3 Lynnfield MA 01940