Dugan & Lopatka eUpdate

Are you planning to tap into your Section 529 college savings plan for education expenses this fall? Before you do, you may want to take a quick refresher course on the tax consequences of withdrawals.

* Qualified distributions of contributions and plan earnings are tax-free, as long as you use withdrawn amounts to pay qualified higher education expenses.

* Qualified higher education expenses include your out-of-pocket expenses for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.  Also included is a limited, reasonable amount of room and board costs when you attend at least half-time  (defined as half the school’s standard full-time course load). Expenses for special-needs services in connection with enrollment or attendance qualify too.

* As a general rule, an eligible educational institution is a college, university, graduate, technical or vocational school.

* A 10% additional tax applies to the earnings portion of distributions that fail to meet the tax-free criteria – unless an exception applies. Exceptions include withdrawals in cases of a beneficiary’s death, disability or attendance at specified military schools, and certain rollovers or transfers to other 529 plans.

Please call us for more information, including the most tax-efficient way to take distributions from your 529

plan and the interaction of withdrawals with educational tax credits and amounts taken from other tax-advantaged

accounts.

You don’t usually think of fall as a major tax filing time, but there are several important tax deadlines coming up this September and October. Check the deadlines below to see if any apply to you or your business.

September 15 – Due date for third quarter installment of 2011 individual estimated income tax.

September 15 – Filing deadline for 2010 tax returns for calendar-year corporations that received an automatic

extension of the March 15 filing deadline.

September 15 – Filing deadline for 2010 partnership tax returns that received an extension of the April 18 filing

deadline.

October 3 – Generally, the deadline for self-employed individuals and small businesses to establish a SIMPLE

retirement plan for 2011.

October 17 – Filing deadline for 2010 individual income tax returns that received an extension of the April 18

filing deadline.

October 17 – Deadline for undoing a 2010 conversion of a regular IRA to a Roth IRA and switching the Roth back

to a regular IRA without penalty.

If you need more information or filing assistance, contact our office.