ira - Linkenheimer LLP CPAs & Advisors

You Can Unwind Roth IRA Conversion Before October 15, 2014

The market has generally been up since 2013, but if the value of your IRA has declined since your 2013 conversion date, or if your cash situation has changed significantly since you decided to convert, you can “recharacterize” the conversion transaction and avoid the tax. Generally speaking, you can unwind the conversion with a trustee-to-trustee transfer from the Roth back to a traditional IRA no later than 10/15/14. If you have already filed your 2013 return, you will need to amend.

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Year-end tax planning with checklists and tips

Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them, which, at the present time, looks doubtful. These include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70-1/2 or older from IRAs for charitable purposes. For businesses, tax breaks that are available through the end of this year but won’t be around next year unless Congress acts include: 50% bonus first-year depreciation for most new machinery, equipment and software; an extraordinarily high $500,000 expensing limitation; the research tax credit; and the 15-year write-off for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.

High-income-earners have other factors to keep in mind when mapping out year-end plans. For the first time, they have to take into account the 3.8% tax surtax on unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax that applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for […]