Retire

Article Dean Dorton

John BalbachWith heavy hearts, we share the news of the passing of our dear friend, colleague, and partner, John J. Balbach.

John was a native of Louisville and alumni of St. Xavier High School. Balbach graduated from Murray State University in 1974, with a degree in accounting. He began his accounting career with Charles R Hatton & Company, moving on to Geary, Balbach & Hardt until it was sold to Arthur Young. He joined Cotton and Allen in 1986 and was later named a partner in the Firm. His practice was focused primarily on income taxation and estate planning. Balbach was also involved in business consultation including business transactions, and design and implementation of accounting systems. With more than 40 years in the accounting practice, 30 of which were at Dean Dorton Allen Ford, Balbach distinguished himself as a notable Louisville business advisor, with retirement just last year in 2016.

His favorite memory at Dean Dorton was serendipitously discovering other Murray graduates at the firm. He was actively involved in the community, sitting on boards and committees for the Tom Sawyer State Park Foundation, Our Lady’s Rosary Makers, St. Margaret Mary Church, United Crescent Hill Ministries, and his home owners’ association.

During retirement, Balbach spent much of his time enjoying trips around the world including Germany and Alaska with his wife, Cathy, and spending lots of time with family (including two young grandsons) and friends.

“John was more than just a partner working at a local accounting firm. His exceptional personality made him a valued resource for many clients and a business advisor of the highest caliber. He was one of the kindest people I have ever worked with and made every day of “work” a pleasure. John cared deeply for all of his clients and colleagues whom he considered friends,” says Gwen Tilton, Louisville Managing Director. “John touched so many lives for the good. We are truly honored and grateful we were a part of his career and life for so many years.”

Visitation will be held from 2-8 p.m. Friday, July 7, 2017 at Ratterman Funeral Home, 12900 Shelbyville Road, East, Louisville. Mass of Christian Burial will be celebrated on Saturday, July 8, 2017 at 10 a.m. at St. Margaret Mary Catholic Church, 7813 Shelbyville Road, Louisville.

In lieu of flowers, the family has requested donations be made to St. Xavier or Trinity High School Annual Funds.

Article Dean Dorton

Saving for retirement can be tough if you’re putting most of your money and time into operating a small business. However, many retirement plans aren’t difficult to set up and it’s important to start saving so you can enjoy a comfortable future.

So if you haven’t already set up a tax-advantaged plan, consider doing so this year.

Note: If you have employees, they generally must be allowed to participate in the plan, provided they meet the qualification requirements.

Here are three options:

  1. Profit-sharing plan. This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. You can make deductible 2016 contributions as late as the due date of your 2016 tax return, including extensions — provided your plan exists on Dec. 31, 2016. For 2016, the maximum contribution is $53,000, or $59,000 if you are age 50 or older.
  2. Simplified Employee Pension (SEP). This is also a defined contribution plan that provides benefits similar to those of a profit-sharing plan. But you can establish a SEP in 2017 and still make deductible 2016 contributions as late as the due date of your 2016 income tax return, including extensions. In addition, a SEP is easy to administer. For 2016, the maximum SEP contribution is $53,000.
  3. Defined benefit plan. This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum annual benefit for 2016 is generally $210,000 or 100% of average earned income for the highest three consecutive years, if less. Because it’s actuarially driven, the contribution needed to attain the projected future annual benefit may exceed the maximum contributions allowed by other plans, depending on your age and the desired benefit. You can make deductible 2016 defined benefit plan contributions until your return due date, provided your plan exists on Dec. 31, 2016.

Contact us if you want more information about setting up the best retirement plan in your situation.

Article Dean Dorton

There’s a lot to think about when you change jobs, and it’s easy for a 401(k) or other employer-sponsored retirement plan to get lost in the shuffle. But to keep building tax-deferred savings, it’s important to make an informed decision about your old plan. 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 tax-smart 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 your 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.

If you choose a rollover, request a direct rollover from your old plan to your new plan or IRA. If instead the funds are sent to you by check, you’ll need to make an indirect rollover (that is, deposit the funds into an IRA) within 60 days to avoid tax and potential penalties.

Also, be aware that the check you receive from your old plan will, unless an exception applies, be net of 20% federal income tax withholding. If you don’t roll over the gross amount (making up for the withheld amount with other funds), you’ll be subject to income tax — and potentially the 10% penalty — on the difference.

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.

Article Dean Dorton

Last year a break valued by many charitably inclined retirees was made permanent: the charitable IRA rollover. If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions.

Satisfy your RMD

A charitable IRA rollover can be used to satisfy required minimum distributions (RMDs). You must begin to take annual RMDs from your traditional IRAs in the year in which you reach age 70½. If you don’t comply, you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t. (An RMD deferral is allowed for the initial year, but you’ll have to take two RMDs the next year.)

So if you don’t need the RMD for your living expenses, a charitable IRA rollover can be a great way to comply with the RMD requirement without triggering the tax liability that would occur if the RMD were paid out to you.

Additional benefits

You might be able to achieve a similar tax result from taking the RMD payout and then contributing that amount to charity. But it’s more complex because you must report the RMD as income and then take an itemized deduction for the donation. This has two more possible downsides:

  • The reported RMD income might increase your income to the point that you’re pushed into a higher tax bracket, certain additional taxes are triggered and/or the benefits of certain tax breaks are reduced or eliminated. It could even cause Social Security payments to become taxable or increase income-based Medicare premiums and prescription drug charges.
  • If your donation would equal a large portion of your income for the year, your deduction might be reduced due to the percentage-of-income limit. You generally can’t deduct cash donations that exceed 50% of your adjusted gross income for the year. (Lower limits apply to donations of long-term appreciated securities or made to private foundations.) You can carry forward the excess up to five years, but if you make large donations every year, that won’t help you.

A charitable IRA rollover avoids these potential negative tax consequences.

Have questions about charitable IRA rollovers or other giving strategies? Please contact us. We can help you create a giving plan that will meet your charitable goals and maximize your tax savings

Article Dean Dorton

We are at once delighted and disheartened to announce that John Balbach, Director of Taxes, is retiring at the end of this month. He has been with the firm for 30 years and has made an incredible impact during his time here.

John’s practice is directed to taxation for corporations, partnerships, individuals, and estates. He is also involved in business consultation covering topics such as business acquisitions or dispositions, and design and implementation of accounting systems.

John earned his Bachelor of Science degree in Accounting from Murray State University in 1974, and his favorite memory at Dean Dorton was serendipitously discovering other Murray graduates at the firm. He is actively involved in the community, sitting on boards and committees for the Tom Sawyer State Park Foundation, Our Lady’s Rosary Makers, St. Margaret Mary Church, United Crescent Hill Ministries, and his home owners association.

John Balbach retirementOnce he retires, John is most looking forward to impromptu trips with his wife, Cathy, and spending time with family (including two young grandsons). On his first day of retirement, he is having a backyard party for family to celebrate three pinnacle events in his family: the retirements of both John and Cathy, as well as the upcoming marriage of his youngest daughter.

We all extend our best wishes as John takes an extended and much-deserved vacation packed with exciting travels, such as the river cruise he’ll take in Germany this fall. We’ll be thinking of him and enjoying our firm dinner leftovers as he is basking in the European sun.