Archive for the ‘Retirement’ Category

Can’t Find Pub 590?

January 19, 2015

IRS Publication 590One of the most important publications issued each year by the IRS is Publication 590, Individual Retirement Arrangements (IRAs). Individuals rely on Pub 590 for explanations of the rules, and professionals look to this publication for insight into how the IRS interprets the law in some of the gray areas. You may have trouble finding the 2014 edition, however.

That’s because the IRS decided to split Pub 590 into two publications, 590-A for contributions to IRAs, and 590-B for distributions from IRAs. Many websites, including irs.gov (and, dare we say, this one) have not fully caught up with the change. Links to IRS publications automatically go to the latest version when they appear on the IRS website, so we aren’t used to updating those links. The IRS isn’t redirecting that web traffic, though, so links to Pub 590 will bring up the 2013 edition, even though the 2014 replacements are available:

Good Time to Think About Roth Conversion

January 14, 2015

Roth retirement accountsWe often think in terms of year-end tax planning, but there are some moves that can be especially advantageous early in the year. A Roth conversion is one of them.

details: Roth Conversion Early in the Year

Another Change in the Rollover Rules

November 13, 2014

We have further guidance from the IRS on another change in the rollover rules. This one has to do with the rule saying you have to wait a year after doing a 60-day rollover from one IRA to another before you do another. The IRS announced earlier this year that it would apply a stricter interpretation of the rule beginning in 2015. A November 2014 announcement clarifies the earlier guidance.

details: One Rollover Per Year

Big Change in the 401k Rollover Rules

September 23, 2014

We don’t often get a change this big in an area as important as 401k rollovers. The IRS released guidance completely revising the way we treat rollovers when your 401k or similar account includes after-tax dollars. Ed Slott, author of Ed Slott’s 2014 Retirement Decisions Guide, praised the guidance, saying, “The IRS has made it easier for many people to make their retirement savings more tax-efficient.”

What’s the big deal? Previously it was difficult to separate pre-tax dollars from after-tax dollars when taking money from an employer plan. Now it’s a snap, which means you can send pre-tax dollars to a traditional IRA for a tax-free rollover while sending after-tax dollars to a Roth IRA for a tax-free conversion. This is a big win for people with retirement savings. Use the link below for a full explanation

details: Isolating Basis for a Roth Conversion

Self-Directed IRA Implodes

May 20, 2013
By Kaye A. Thomas

Individual retirement accounts typically hold conventional investments such as publicly traded stocks, bonds, mutual funds and certificates of deposit. If you want it to hold something unusual, such as real estate or an interest in a business that isn’t publicly traded, you have to establish a self-directed IRA at a financial institution that will accept these entities. I’m not a fan of the idea, and a recent Tax Court case illustrates one of the dangers.

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Expert’s Expert on IRAs

May 19, 2013

Where does an expert turn for answers on IRAs? Whenever possible, I turn directly to the law: Internal Revenue Code, regulations, IRS rulings and court cases. Sometimes I want a reliable way to get to an answer more quickly though, and fortunately there’s a great way to do that. I reach for one of the most valuable books in my library, Life and Death Planning for Retirement Benefits by Natalie B. Choate. This 600-page reference would be overkill for an investor who might have an occasional question about how to deal with an IRA or other retirement account. For a financial advisor or tax professional who regularly deals with retirement planning issues, the book is simply indispensable. I’ve referred to it often, and it never lets me down.

Basis Isolation for Roth Conversions

March 26, 2013
By Kaye A. Thomas

We first posted on the topic of basis isolation for Roth conversions some four years ago, and we continue to receive inquiries on the topic. In response, we’ve upgraded our coverage. Previously we had a single article that described and critiqued the techniques that have been proposed. Now we offer a collection of seven articles dealing with different aspects of the topic.

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IRS to Issue Guidance on In-Plan Conversions

January 29, 2013

Speaking at a meeting of the Tax Section of the American Bar Association, a Treasury official said there is a plan to issue guidance concerning in-plan Roth conversions. As reported here earlier, the American Taxpayer Relief Act of 2012 expanded the availability of these transactions, which move assets from a traditional 401k or similar account to a designated Roth account within the same plan. The timing for this guidance has not yet been determined but the goal is to have it out by mid-year.

Qualified Charitable Distribution Transition Rule

January 11, 2013

The American Taxpayer Relief Act of 2012 (ATRA) extends the tax treatment of qualified charitable distributions from IRAs, so that they are available for 2012 and 2013. Because this law wasn’t enacted until January 2013, it includes a special transition rule. You can take advantage of this rule retroactively for 2012, but only if you act before the end of January 2013.

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American Taxpayer Relief Act

January 3, 2013
By Kaye A. Thomas

In a last gasp effort Congress passed legislation to avert the fiscal cliff and prevent tax increases on 98% of Americans. Key features of the American Taxpayer Relief Act of 2012 (“ATRA”) include the following:

  • Existing income tax rates (including marriage penalty relief) are preserved for taxpayers with income up to $400,000 ($450,000 for couples filing jointly). A tax rate of 39.6% applies above that level.
  • Qualified dividends will continue to be taxed at capital gain rates, but a 20% rate will apply to both of these beginning at the income thresholds mentioned above.
  • The personal exemption phaseout and the Pease rule for reducing itemized deductions are revived, but at higher income levels than under prior law.
  • The law permanently fixes the alternative minimum tax (“AMT”), eliminating the recurring need for an “AMT patch.”
  • Seemingly out of nowhere, the law expands the availability of in-plan Roth conversions.
  • The estate tax provisions are more generous than might have been expected, retaining the $5 million exemption and raising the rate by only 5 percentage points, to 40%.

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