Friday, April 22, 2005
ROTH 401(k) = Investment Options
The age old question- pay now or pay later?
You'll may have more choices next year than before. Starting in 2006, employers have the option to offering the new Roth 401(k) to employees.
Just like it sounds, the Roth 401(k) will combine features from the Roth IRA and basic 401(k) plans. Here are some highlights:
- Contributions are made with after-tax dollars and grow tax free.
- All withdraws after age 591/2 will be tax free.
- Contribution limits will match regular 401(k) plans at $15,000 instead of the Roth IRA plans of only $4,000 for those younger than 50
- No income initiations to participate
There are some things to beware of, such as you can't effectively "double" your contribution by simply by having both a traditional 401(k) and Roth 401(k) accounts. The same yearly maximum contribution limits apply to each type of account- or both accounts combined. Also, if your employer provides a matching contribution, that matching contribution must be put into a regular 401(k) account.
As we move closer to 2006, the IRS webpage that has information on 401(k) plans should provide information on the new accounts.
The Roth 401(k) is bound to be a powerful new tool in the retirement account game. If you are any type of incorporated entity, single member LLC, multiple member LLC, partnership, sub-chapter "s" Corporation, or a regular C Corp., talk to your accountant this year about the possibility of implementing a Roth 401(k) for your organization.
Tuesday, April 19, 2005
More on identity theft risk
Russell has been blogging extensively on the risk of identity theft and the actual loss of personal data at ChoicePoint, LexisNexis and HSBC.
Now it turns out the Internal Revenue Service is taking a verbal beating for allowing unauthorized people to review, and even change, income tax data.
According to The Washington Post Online, a congressional report released this week indicates that over 7500 people have access to, and the ability to change, tax and financial crimes records. The GAO reported that 32 of the 53 problems cited in 2002 were fixed, but they identified 39 new flaws in addition to the 21 that were not fixed since the last review.
The usual congressmen are posturing on this report and demanding changes. Of course no changes will be forthcoming.
In a 1997 report the GAO titled "IRS SYSTEMS SECURITY - Tax Processing Operations and Data Still at Risk Due to Serious Weaknesses" The General Accounting Office found serious data handling flaws.
And in a 2001 review of the 2000 tax filing season the GAO again cited the IRS for a serious lack of data security. For example:
IRS did not ensure the protection of sensitive business, financial, and
taxpayer data on other critical systems in its servicewide network during the 2000 tax filing season. Weak controls over internal IRS networks could have allowed intruders to use e-file computers to gain unauthorized access to other IRS systems. Certain network control devices—largely intended to protect other internal IRS computer systems from unauthorized access— were not effectively configured or deployed to prevent such intrusions. For example, IRS personnel “turned off” (bypassed) the network control devices in order to speed up the processing of electronic tax returns.
There appears to be no incentive for the government to keep our personal data secure. After all, the only price to be paid in this case is political. In the case of ChoicePoint, Inc. or LexisNexis, the harmed parties can seek recovery. So in the end, we might feel safer with our personal data in the hands of private enterprise than we do with it in the hands of our own government.