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By Nancy Burner Esq.

Nancy Burner, Esq.

The Consumer Directed Personal Assistance Program (CDPAP) allows Medicaid long term care recipients to choose their own home care attendant, including family members, rather than hiring an aide from a home care agency.

Under the standard Medicaid process, after Medicaid approval, the recipient undergoes an assessment with a Managed Long-Term Care plan (MLTC). The assessment determines the number of hours of care Medicaid will provide. After the assessment process, the Medicaid recipient signs up with a home care agency that is under contract with the preferred MLTC. The agency sends the aides to provide the care and Medicaid covers the cost.

Home Care aides are limited to assisting patients with activities of daily living (ADLs), which include but are not limited to walking, cooking, light housekeeping, bathing, and toileting. But, aides cannot perform “skilled tasks” such as administering medication or assisting with insulin injections. The aide can give certain cues, such as placing the medication in front of the patient indicating it is time to administer.

While many of our clients enrolled with an MLTC and home care agency are happy with the care provided, this is not the case for everyone. Some patients need an aide who performs skilled tasks. This is especially true for patients who live alone. Other patients already have a caregiver that they prefer to use instead of a home care aide they do not know.

CDPAP allows almost any individual to act as a paid caregiver, except for a legally responsible relative, such a spouse or guardian. A child, for example, who takes care of his or her parent can get paid under CDPAP. There is no prerequisite to get certified as a home health aide or a registered nurse. Training occurs at the home and the aide is not restricted to solely assisting with ADLs- but can also assist with skilled tasks.

It is important to note that under CDPAP, an aide is an independent contractor, not an employee of the agency. The patient is thus responsible for hiring the aides, scheduling the care, and ensuring the plan is carried out. Additionally, the patient cannot take advantage of some of the benefits an agency provides, such as sending in backup care if the current aide is sick or if an emergency arises.

Navigating Medicaid’s various programs can be confusing. It is important to discuss your options with an elder law attorney who has extensive Medicaid long term care experience. This way you get the best care that matches your specific needs.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Here is something to think about: You could spend two, or even three, decades in retirement. To meet your income needs for all those years, you’ll generally need a sizable amount of retirement assets. How will Social Security fit into the picture?

For most people, Social Security won’t be enough to cover the cost of living in retirement. Nonetheless, Social Security benefits are still valuable, so you’ll want to do whatever you can to maximize them.

Your first move is to determine when you should start taking Social Security. You can begin collecting benefits when you reach 62 – but should you? If you were to turn 62 this year, your payments would only be about 71% of what you’d get if you waited until your full retirement age, which is 66 years and 10 months. (“Full retirement age” varies, depending on when you were born, but for most people today, it will be between 66 and 67.) Every month you wait between now and your full retirement age, your benefits will increase. If you still want to delay taking benefits beyond your full retirement age, your payments will increase by 8% each year, until you’re 70, when they “max out.”  Regardless of when you file, you’ll also receive an annual cost-of-living adjustment.    

So, when should you start claiming your benefits? There’s no one “right” answer for everyone. If you turn 62 and you need the money, your choice might be made for you. But if you have sufficient income from other sources, you’re in good health and you have longevity in your family, or you’re still working, it might be worthwhile to wait until your full retirement age, or perhaps even longer, to start collecting.

Another key consideration is spousal benefits. If your own full retirement benefit is less than 50% of your spouse’s full retirement benefit, you would generally be eligible to claim spousal benefits, provided you’re at least 62 and your spouse has filed for Social Security benefits.

Survivor benefits are another important consideration. When you pass away, your spouse would be able to receive up to 100% of your benefit or his/her own retirement benefit, whichever is higher. Thus, delaying Social Security could not only increase your own benefit, but also the benefit for your surviving spouse.

An additional issue to think about, when planning for how Social Security fits into your retirement, is your earned income. If you’re younger than full retirement age, your benefit will be reduced by $1 for each $2 you earn above a certain amount, which, in 2021, is $18,960. During the year you reach full retirement age, your benefit will be reduced by $1 for each $3 you earn above a set amount ($50,520 in 2021). But once you hit the month at which you attain full retirement age, and from that point on, you can keep all of your benefits, no matter how much you earn (although your benefits could still be taxed).

One final point to keep in mind: The more you accumulate in your other retirement accounts, such as your IRA and 401(k) or similar employer-sponsored plan, the more flexibility you’ll have in managing your Social Security benefits. So, throughout your working years, try to contribute as much as you can afford to these plans.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Independence Day is almost here. And as we make progress in moving past the COVID-19 pandemic, more of us will be able to enjoy Fourth of July activities. However you observe the holiday, it’s important to recognize all the liberties we enjoy in this country. But you may still need to work at one particular type of freedom – and that’s financial freedom. How can you achieve it?

There’s no one instant solution. But you can work toward financial independence by addressing these areas:

  • Retirement savings – Approximately 45% of Americans think the ideal retirement involves “enjoying my well-earned freedom,” according to the March 2021 Edward Jones/Age Wave Four Pillars of the New Retirement study. But when you’re retired, the risk to this freedom is obvious – the paychecks have stopped but the bills haven’t. Furthermore, you could spend two or three decades in retirement. That’s why it’s so important to contribute as much as you can afford to your tax-advantaged retirement accounts, such as your IRA and your 401(k) or another employer-sponsored plan. At a minimum, put in enough to earn your employer’s matching contribution, if one is offered. Whenever your salary goes up, try to increase the annual amount you put in your 401(k) or similar plan. And if appropriate, make sure you have a reasonable percentage of growth-oriented investments within your 401(k) and IRA. Most people don’t “max out” on their IRA and 401(k) each year, but, if you can consistently afford to do so, and you still have money you could invest, you may want to explore other retirement savings vehicles.
  • Illness or injury – If you were to become seriously ill or sustain a significant injury and you couldn’t work for an extended period, the loss of income could jeopardize your ability to achieve financial independence. Your employer may offer disability insurance as an employee benefit, but this coverage is typically quite limited, both in duration and in the amount of income being replaced. Consequently, you may want to consider purchasing private disability insurance. Keep in mind that this coverage, also, will have an end date and it probably won’t replace all the income lost while you’re out of work, but it will likely be more expansive and generous than the plan provided by your employer.
  • Long-term care – Individuals turning 65 have about a 70% chance of eventually needing some type of long-term care, such as a nursing home stay or the assistance of a home health aide, according to the U.S. Department of Health and Human Services. And these services are quite expensive – the average annual cost for a private room in a nursing home is more than $100,000, according to Genworth, an insurance company. Medicare typically covers only a small part of these expenses, so, to avoid depleting your savings and investments (and possibly subjecting your grown children to a financial burden), you may want to consider long-term care insurance or life insurance with a long-term care component. A financial advisor can help you choose a plan that’s appropriate for your needs.

By addressing these areas, you can go a long way toward attaining your financial independence. It will be a long-term pursuit, but the end goal is worth it.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

 

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By Nancy Burner, Esq.

Nancy Burner, Esq.

As of June 13, 2021, New York State has an amended Power of Attorney (“POA”) statute and a new statutory document to go along with it!  

On December 15, 2020, Governor Andrew M. Cuomo signed a bill into law that amended the New York State General Obligations Law as it relates to powers of attorney. A POA is a document by which an individual grants authority to another to engage in certain financial and business transactions on their behalf. The one granting authority is termed “Principal” and the person they are authorizing to act is the “Agent.” 

While the POA originated as a document to facilitate business transactions, it has been coopted over time by estate planning and elder law attorneys as an important tool for handling the affairs of a Principal with diminishing mental or physical capacity to handle their own affairs. In these situations, the Agent should be given the specific powers to handle banking transactions, retirement account transactions, sign contracts on behalf of an individual, and the list goes on.

The most visible change in the 2021 enactment is the elimination of the Statutory Gifts Rider; an attachment to the POA that allowed for various shifts of assets out of a person’s individual name. While it will still be necessary to list out the specific powers being granted relating to gifting, it will no longer be in a separate document but rather, will be incorporated into the POA document itself.

Another big difference will be the requirement that the Principal’s signature be witnessed by a notary and two witnesses (one of which can be the same individual that is serving as the notary). The witness requirement existed with the 2010 law, but only for Principal’s conferring gifting authority. The second witness was put added to the statute to give extra protection to a Principal that may be the subject of elder abuse or undue influence.  

The new statute also incorporates provisions to allow for someone to sign on behalf of a Principal that lacks the physical ability to sign. As an example, I have a client diagnosed with Parkinson’s Disease who has lost the use of her hands. With the new law, she can now direct someone to sign the document for her. She must still be present at the signing and be able to demonstrate her mental capacity to execute the document, but she will not have to worry that she can no longer sign her name.  

For anyone that has already seen an attorney and completed their estate planning the question becomes, do I need to sign a new POA? The answer will be different for each person. 

Any POA that was valid at the time it was executed will remain in effect but if the document is outdated or does not include all the powers that may be necessary down the road, it may be prudent to sign a new one. However, a change in law such as this is the perfect reminder to make an appointment with an estate planning attorney to have your entire plan reviewed, including your power of attorney.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Now that we’ve gained at least some space from the COVID-19 pandemic, summer travel is heating up. But while you might be eager to hit the road, you won’t want your investments to take a vacation — you need them to work hard for you consistently. But how can you make this happen? 

Here are some ideas:

Know your destination.“If you don’t know where you want to go, then it doesn’t matter which path you take.” This bit of wisdom, paraphrased from the classic children’s book, Alice’s Adventures in Wonderland, may be appropriate for, say, hikers exploring a new landscape. But as an investor, it matters a great deal which path you take. If you only dabble in investing, occasionally putting some money into one investment or another, it will be difficult to build a portfolio that’s consistently working in your best interest. It’s important to create a long-term investment strategy based on where you want to go in life — that is, how long you plan to work, what sort of retirement lifestyle you envision, and so on.

Match goals with investments. Some investments are designed to achieve certain goals. To illustrate: When you contribute to an IRA and a 401(k) or similar employer-sponsored plan, you’re investing for one specific, long-term goal: a comfortable retirement. While you can tap into these accounts for other purposes — though doing so might incur immediate taxes and penalties — they are designed to provide you with income during your retirement years. Similarly, you may have other investments for other purposes, such as a 529 education savings plan. Here’s the key point: Goals-based investing, by its nature, can help ensure your portfolio is always working on your behalf, in the way you intended.

Invest for growth. Ideally, hard work produces results, and one of the main results you want from your investments is growth — that is, you want your investments to appreciate in value so they can eventually help you meet your goals. But if you are overconcentrated in vehicles such as certificates of deposit (CDs) and government securities, you may end up lowering your growth potential. That’s not to say that CDs and Treasury bills are in some sense “lazy.” They can provide you with income and help you reduce the impact of market volatility on your portfolio. But to achieve most of your goals, you’ll need a reasonable number of growth-oriented investments working for you, with the exact percentage based on your needs and life stages.

Check your progress. How else can you ensure your investments aren’t just taking it easy? By checking up on them. If you follow a buy-and-hold strategy, your portfolio shouldn’t require many changes if it already reflects your goals, risk tolerance and time horizon. Too much buying and selling could jeopardize your ability to follow a consistent, long-term strategy. However, “buy and hold” doesn’t mean “buy and forget.” By reviewing your portfolio at least once a year, you can determine if your investments are performing as they should. If they’re not working for you as you’d like, you may need to make some changes.

If you’re traveling this summer, relax and enjoy yourself — but keep those investments working hard.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

There is no such thing as a honeymooner’s will, but maybe there should be. Once the honeymoon is over, the dress put away, and every conceivable photograph posted to social media, it is time to start considering the legal implications of getting married. 

There may be a name change, joint bank accounts and IRA beneficiary change forms. Most newly married couples fail to check estate planning off their lists because they consider themselves too young to worry about such things.

The uncertainty of the pandemic has caused almost everyone in the world — no matter what age — to consider their own mortality. A recently married couple needs to ensure that their newly entwined life includes each other in a legal sense, as well as in a practical sense, in that they need to know each other’s preferences under worst case scenarios. Most couples do not need more than a basic estate plan, consisting of Advance Directives and a Last Will and Testament.

Life & Death Decisions

Everyone eighteen years of age or older needs advanced directives: Living Will, Health Care Proxy and Power of Attorney. A Living Will allows someone to specify if they want to be kept alive by artificial means if they are in a vegetative state with no reasonable expectation of recovery. A Health Care Proxy allows a person to choose who will make medical decisions in case that person cannot do so. In New York State, only one agent can act under a health care proxy at a time, which avoids confusion and tearful showdowns. A Power of Attorney is a powerful document that allows the principal to name one or more people to handle a wide range of financial matters in case of incapacity.

Dying Without a Will

If a married person dies without a Will in New York State and has no children, the spouse inherits all the assets. This may not necessarily be what the newlywed couple wants — especially regarding heirlooms, ancestral real estate, or a closely-held business. What about real property that one spouse borrowed money to buy with the oral promise to pay back a parent or sibling? Nobody should ever rely on a spouse’s promise to carry out “informal” instructions after death – this rarely happens and creates family tension.

If married with children, the spouse receives the first $50,000 of assets plus 50% of the remaining assets; the other half goes to any minor or adult children. Since minors cannot receive assets outright, this creates a complicated Surrogates Court scenario. If the children are adults from a previous marriage – this automatic allotment may not be ideal. Remember, the intestacy statute is a default blunt instrument and leaves no room for nuance.

Finally, there are practical considerations to dying with a Will versus without, that affect loved ones and make a painful process worse. A Will can dispense with the need for a bond, ensures family members that they are provided for, and avoids unnecessary delays in transferring wealth.

An experienced estate planning attorney will be able to provide invaluable guidance on related issues as well, such as whether you need life insurance, business succession planning, and the best way to designate beneficiaries on retirement accounts. A couple should also explore the option of establishing a living trust to avoid probate, which is necessary when someone owns income producing property, a small business, or property out of state. Estate planning may not seem very romantic, but discussing life and death issues is the best way to plan for the long life ahead of you!

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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The IRS and the New York State Dept. of Taxation and Finance have extended the due date for personal income tax returns and related payments to May 17, 2021 due to the continued impact of COVID-19. METRO photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

In 2017, the Tax Cuts and Jobs Act increased the federal estate tax exclusion amount for decedents dying in years 2018 to 2025. The exclusion amount for 2021 is $11.7 million. This means that an individual can leave $11.7 million, and a married couple can leave $23.4 million dollars to their heirs or beneficiaries without paying any federal estate tax. This is a good thing because the federal estate tax rate is 40 percent.

Despite the large Federal Estate Tax exclusion amount, New York State’s estate tax exemption for 2021 is $5.93 million. Prior to April 1, 2014, the New York State estate tax exemption was $1 million, and many estates had to file New York State estate tax returns and pay New York State estate tax.

With the current exemptions, there would technically be no requirement to file either a New York State or federal estate tax return and no tax would be due. However, the inquiry does not end there. For example, if one spouse survived, and has approximately $5 million dollars in assets, it is recommended that he/she file a federal estate tax return to elect “portability” to capture the deceased spouse’s unused $11.7 million-dollar federal exemption. This would be necessary in the event of the living spouse’s assets appreciating over time and/or the federal estate tax exclusion decreasing leaving him/her with assets valued over the federal exclusion at the time of his/her death.

For those dying after December 31, 2010, if a first-to-die spouse has not fully used the federal estate tax exclusion, the unused portion called the “Deceased Spousal Unused Exclusion Amount,” or “DSUE amount,” can be transferred or “ported” to the surviving spouse. Thereafter, for both gift and estate tax purposes, the surviving spouse’s exclusion is the sum of (1) his/her own exclusion in the year if death, plus (2) the first-to-die’s ported DSUE amount.

In order for the surviving spouse to be able to use the unused exemption, the executor of the first-to-die’s estate must make an election on a timely-filed estate tax return. A timely filed return is a return filed within nine months after death or within fifteen months after obtaining an automatic extension of time to file from the IRS. Normally a federal estate tax return is only due if the gross estate plus the amount of any taxable gift exceeds the applicable exclusion amount (up to $11.7 million in 2021). However, in order to be able to elect portability, a federal estate tax return would have to be filed even if the value of the first-to-die’s estate was below the exclusion amount.

The problem occurs when the first spouse dies, and no estate tax return was filed. In that event, the second to die spouse could not use the deceased spouse’s unused exemption. What if the first spouse dies, no estate tax return is filed, and no election was made on a timely basis? Does the surviving spouse lose the exemption?

In June 2017, the IRS issued Revenue Procedure 2017-34. The Revenue Procedure is a simplified method to be used to make a late portability election. The IRS made this procedure applicable to estates during the two-year period immediately following the decedent’s date of death. This gives you 24 months to file rather than 15 months.

To be eligible to use the simplified method under the Revenue Procedure the estate must meet the following criteria:

(1) The decedent: (a) was survived by a spouse; (b) died after December 31, 2010; and (c) was a citizen or resident of the United States on the date of death;

(2) The executor was not required to file an estate tax return based on the value of the gross estate;

(3) The executor did not file an estate tax return within the time required; and

(4) The executor either files a complete and properly prepared United States Estate (and Tax Return) on or before the second annual anniversary of the decedent’s date of death.

If more than two years has elapsed since the date of death but all other criteria of Revenue Procedure 2017-34 were met, then the Executor would have to request a Private Letter Ruling from the IRS to obtain an extension of time elect portability and file a federal estate tax return.

For those that had spouses pass away after December 31, 2010, portability can be a valuable estate planning tool to save a significant amount of federal estate tax on the death of the second spouse. If a surviving spouse has assets that are close in value to the current federal exclusion amount, it is important to examine the records of the deceased spouse to make sure that a portability election was made on a timely filed federal estate tax return. If no return was filed, and no estate tax return was required to be filed, based upon this IRS Revenue Procedure it may not be too late to elect portability.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

On April 22, we observe Earth Day, an occasion that has inspired millions of people over the decades to take steps to clean up our world. Of course, your physical surroundings are important, but you also operate in other “ecosystems” – social, cultural and political. And you’ll need to consider your investment environment, too. How can you improve it?

Here are a few suggestions:

  • Avoid “toxic” investment strategies. The dangers of pollution helped drive the creation of Earth Day. As an investor, you also need to watch out for “toxins” – particularly in the form of unhealthy investment techniques. For example, chasing after “hot” stocks can burn you. In the first place, by the time you’ve heard of them, they may already be cooling off. Second, and probably more important, these hot stocks just may be wrong for the investment mix that’s appropriate for your needs. Another toxic investment strategy: trying to “time” the market by “buying low and selling high.” No one can really predict when market highs and lows will occur, and if you’re always jumping in and out of the investment world, you’ll likely waste time and effort – not to mention money. Instead of looking for today’s hottest stocks or guessing where the market is heading, try to create and follow a long-term investment strategy based on your goals, risk tolerance and time horizon.
  • Reduce waste.From an environmental standpoint, the less waste and garbage we produce, the better it is for our planet. As an investor, can you find “wasteful” elements in your portfolio? It’s possible that you own some investments that may be redundant – that is, they are virtually indistinguishable from others you may have. Also, some investments, due to their risk profile or performance, no longer may be suitable for your needs. In either case – redundancy or unsuitability – you might be better off selling the investments and using the proceeds to purchase others that can be more helpful.
  • Recycle wisely.Recycling is a major part of the environmental movement. At first, though, you might not think the concept of recycling could apply to investing. But consider this: If you own stocks or mutual funds, you may receive dividends, and, like many people, you may choose to automatically reinvest those dividends back into the stocks or funds. So, in a sense, you are indeed “recycling” your dividend payments to boost your ownership stakes – without expending additional resources. And, in fact, this can be quite an effective and efficient way to increase your wealth over time.
  • Plant some “trees.”Planting trees has always been a key activity among boosters of the environment – with the recognition that their efforts will take years, or even decades, to reach fruition. When you invest, you must sometimes start small. By purchasing a limited amount of an investment and nurturing it over the years by adding more shares, you may one day have achieved significant growth. (Keep in mind, though, that there are no guarantees – variable investments such as stocks can lose principal.)

By making these and other moves, you can create a healthy investment environment – one that can help you achieve your long-term goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Linda Toga, Esq.

Linda Toga, Esq.

THE FACTS: 

My mother recently passed away. She had a will which named me as executor and provided that I was to get the bulk of her estate. The balance was to be divided between by two siblings. I found a copy of her will in a file with her other important papers but the original was not in the file. I believe my brother may have the original will since he was a signatory on her safe deposit box which he emptied before my mother died. My brother and I do not get along and he refuses to take my calls.

THE QUESTION:

Is there a way I can compel my brother to turn over the will so that I can petition the court for letters testamentary and handle the probate of my mother’s estate in accordance with her wishes?

THE ANSWER: 

It is unfortunate when there is no cooperation between family members when a loved one dies but it is not uncommon. If you have asked your brother about the will and he refuses to turn it over, file it with the court or provide any information about its whereabouts; all is not lost. You can ask the Surrogate’s Court in the county where you mother lived for an order compelling your brother to provide information about the will and to turn it over if he does, in fact, have custody of the document. 

You should have an experienced attorney prepare and file with the court a petition to compel production of a will. The court will need the name and address of the brother you believe has the will, as well as the names and addresses of all other interested parties. The court also requires an original death certificate and a proposed order. 

Once the Surrogate signs the order, a certified copy of the order directing your brother to participate in an inquiry about the whereabouts of the will and to turn over to the court the original will must be served upon your brother. Your attorney then has the authority to question your brother about the will. If he refuses to cooperate with your attorney, your brother has a date certain set by the court to either turn over the will or explain why he cannot do so. The court can then decide how best to proceed. 

Although your brother’s inheritance may be smaller if your mother’s will is probated than if an administrator is appointed, hopefully your brother will do the right thing when faced with a legally enforceable court order. 

Linda M. Toga, Esq. provides legal services in the areas of estate administration, estate planning, real estate and small business services from her East Setauket office.  Call 631-444-5605 or vising her website at www.LMTOGALAW.com to schedule a consultation. 

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As you’ve probably heard, the government extended the federal income tax filing deadline for individual taxpayers from April 15 to May 17, due to the COVID-19 pandemic. But the extra month doesn’t just give you additional time to prepare your taxes – it also provides you with an extra chance to contribute to some tax-advantaged investments for the 2020 tax year.

First of all, you’ve got more time to fully fund your IRA – in fact, if you don’t already have one, you’ve got until the new tax deadline to open one for the 2020 tax year and then continue funding it for 2021 and beyond. For 2020 and 2021, the IRA contribution limit is $6,000, or $7,000 if you’re 50 or older.

If you have a traditional IRA, your investment dollars are typically tax deductible. So, for example, if you are in the 24% tax bracket, and you put in the full $6,000, your contribution for the 2020 tax year would only “cost” you $4,560, because you’d be able to deduct $1,440 from your taxable income. (Deductibility is gradually phased out at certain income levels.)

And your earnings grow tax-deferred until you start taking withdrawals, typically during retirement. With a Roth IRA, your contributions aren’t deductible, but earnings can grow tax free if you’ve had your account at least five years and don’t take withdrawals until you’re 59½ or older. Eligibility for a Roth IRA also phases out at higher income levels.

What if you own a small business or, like many people this past year, struck out on your own and became self-employed? Business owners who file as sole proprietors also have until May 17 to contribute to, or open, a SEP IRA. (You might qualify for an extension until Oct. 15.) An SEP IRA is similar to a traditional IRA in that contributions are tax deductible and earnings grow tax deferred. For the 2020 tax year, you can contribute the lesser of 25% of your compensation or $57,000. However, special rules govern the maximum deductible contributions, so consult with your tax advisor before finalizing the amount you put in. Also, keep in mind that your estimated taxes for the first quarter of 2021 will still be due on the original April 15 date.

There’s one more area in which the new tax-filing deadline offers you an opportunity: “recontributions” to your retirement plans, such as your IRA and 401(k). In 2020, withdrawal rules were loosened for these accounts for individuals financially affected by the pandemic, and if you took money out, you could spread the taxes over three years. However, during that time, you can recontribute all or part of the withdrawals. And any money you do recontribute before the tax filing deadline of May 17 (or later, if you get an extension) can be excluded on your 2020 tax return, possibly reducing your taxes. So, your recontribution can provide you with more money in your retirement accounts and a tax break today.

One final point: If you’ve already filed your taxes but would still like to claim the extra tax benefits provided by IRA contributions or retirement plan recontributions, you may be able to file an amended return, so check with your tax advisor. In any case, look for ways to benefit from the tax-advantaged opportunities available to you.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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