roth ira - Linkenheimer LLP CPAs & Advisors

The TCJA Prohibits Undoing 2018 Roth IRA Conversions, but 2017 Conversions are Still Eligible

Converting a traditional IRA to a Roth IRA can provide tax-free growth and tax-free withdrawals in retirement. But what if you convert your traditional IRA — subject to income taxes on all earnings and deductible contributions — and then discover you would have been better off if you hadn’t converted it?

Before the Tax Cuts and Jobs Act (TCJA), you could undo a Roth IRA conversion using a “re-characterization.” Effective with 2018 conversions, the TCJA prohibits re-characterizations — permanently. But if you executed a conversion in 2017, you may still be able to undo it.

Reasons to recharacterize

Generally, if you converted to a Roth IRA in 2017, you have until October 15, 2018, to undo it and avoid the tax hit.

Here are some reasons you might want to recharacterize a 2017 Roth IRA conversion:

The conversion combined with your other income pushed you into a higher tax bracket in 2017.
Your marginal income tax rate will be lower in 2018 than it was in 2017.
The value of your account has declined since the conversion, so you owe taxes partially on money you no longer have.

If you re-characterize your 2017 conversion but would still like to convert your traditional IRA […]

By Linkenheimer LLP|2018-08-14T18:09:19+00:00August 14th, 2018|contributions, New Tax Laws, roth ira|0 Comments

Finding a 401(k) That’s Right for Your Business

By and large, today’s employees expect employers to offer a tax-advantaged retirement plan. A 401(k) is an obvious choice to consider, but you may not be aware that there are a variety of types to choose from. Let’s check out some of the most popular options:

Traditional. Employees contribute on a pretax basis, with the employer matching all or a percentage of their contributions if it so chooses. Traditional 401(k)s are subject to rigorous testing requirements to ensure the plan is offered equitably to all employees and doesn’t favor highly compensated employees (HCEs).

In 2018, employees can defer a total amount of $18,500 through salary reductions. Those age 50 or older by year end can defer an additional $6,000.

Roth. Employees contribute after-tax dollars but take tax-free withdrawals (subject to certain limitations). Other rules apply, including that employer contributions can go into only traditional 401(k) accounts, not Roth 401(k)s. Usually a […]

By Linkenheimer LLP|2020-09-03T20:04:37+00:00June 27th, 2018|401k, roth ira|0 Comments

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.

Please call us if you have questions.

By Linkenheimer LLP|2020-09-03T20:05:45+00:00October 7th, 2014|ira, retirement, roth ira|0 Comments

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 […]

By Linkenheimer LLP|2020-09-03T20:05:47+00:00November 26th, 2013|3.8, 401k, agi, amt, best place to work, CPA, hsa, ira, medicare, mike musson, roth ira, Santa Rosa, tax, tax planning, year-end|0 Comments