The Arizona Republic's Russ Wiles came to Ed Slott and Company's recent 2-Day IRA Workshop at the Arizona Biltmore Resort and wrote an article about Roth Conversion planning.
Wiles wrote: "Plus, traditional-to-Roth conversions done in 2010 come with a special sweetener: Normally, you must pay any taxes due in the year you make the switch, but in 2010 only, investors can elect to defer the tax bite and spread it over the following two years, 2011 and 2012.
But in addition to these two key inducements, there's a third, less-obvious reason to consider making a traditional-to-Roth switch: You can change your mind later.
It's not every day that the government lets you back out of a tax move, but you will have that option with a Roth conversion."
CLICK HERE to read the rest of Wiles' article from the 2-Day IRA Workshop in Phoenix.
Compiled by Jared Trexler
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*Copyright 2009 Ed Slott and Company, LLC
Wednesday, November 11, 2009
Tuesday, November 10, 2009
A look back...and a look ahead
Ed Slott's FINAL 2-Day IRA Workshop of 2009 took place just a few days ago at the Arizona Biltmore Resort in Phoenix, Arizona. The workshop included a lot of technical information about 2010 Roth Conversion Planning.
However, if you did not make the November 5th and 6th workshop, register early for Ed Slott's next 2-Day IRA Workshop, Instant IRA Success, in Orlando, Florida on March 19-20, 2010.
CLICK HERE for more information about the 2-Day IRA Workshop in Orlando.
You can become our friend on Facebook (just search for "Ed Slott") to view several other snapshots of the famed Arizona Biltmore Resort. We will begin uploading more pictures of our workshops and events to The Slott Report and our Facebook page in the future.
Monday, November 9, 2009
Retitling an IRA at the Death of the Account Owner
This question keeps coming up, over and over, again and again. The IRA owner has named a trust as the beneficiary of the IRA. The IRA owner has died and the executor, advisor, IRA custodian has been advised that the IRA needs to be retitled “in the name of the trust.”
There is a right way and a wrong way to retitle the IRA in the name of the trust. If you do it the wrong way, you will have a taxable distribution to the trust and there will be no more IRA. If you do it the correct way and the trust is a qualifying trust, then the trust can stretch distributions from the IRA over the age of the oldest trust beneficiary.
To correctly retitle the IRA, the name of the decedent must remain in the title of the IRA. For example: John Smith, deceased, IRA fbo the John Smith Trust. (fbo – for benefit of)
An IRA that is titled in the name of the trust only (or in the name of any non-spouse beneficiary only) is considered distributed in full to the trust and is taxable in the year of the distribution. Be very, very careful when retitling an IRA at the death of the account owner.
You should check with your advisor or tax preparer to determine if your distribution is eligible for this rollover relief.
By IRA Technical Consultant Beverly DeVeny and Jared Trexler
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*Copyright 2009 Ed Slott and Company, LLC
There is a right way and a wrong way to retitle the IRA in the name of the trust. If you do it the wrong way, you will have a taxable distribution to the trust and there will be no more IRA. If you do it the correct way and the trust is a qualifying trust, then the trust can stretch distributions from the IRA over the age of the oldest trust beneficiary.
To correctly retitle the IRA, the name of the decedent must remain in the title of the IRA. For example: John Smith, deceased, IRA fbo the John Smith Trust. (fbo – for benefit of)
An IRA that is titled in the name of the trust only (or in the name of any non-spouse beneficiary only) is considered distributed in full to the trust and is taxable in the year of the distribution. Be very, very careful when retitling an IRA at the death of the account owner.
You should check with your advisor or tax preparer to determine if your distribution is eligible for this rollover relief.
By IRA Technical Consultant Beverly DeVeny and Jared Trexler
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
Thursday, November 5, 2009
Slott Report Mailbag: November 5th
We are in sunny Phoenix for Ed Slott's 2-Day IRA Workshop, Instant IRA Success, at the Arizona Biltmore Resort.
Below is this week's Slott Report Mailbag.
1.
If you elect to convert an IRA to a Roth in the year 2010, when do you pay the taxes? Is it all due in the year 2010, is any of it due in the year 2010? Or do you pay the taxes in the year 2011 and 2012? Also, what is the tax rate? Is it based upon your 2010 tax return or is the tax rate based upon your 2011 or 2012 tax return?
Thanks,
Kathy Lane
Answer:
If you convert in 2010 you have the option to pay the tax due on the conversion in 2010 or if you don't pay it in 2010 you can pay the taxes in 2011 and 2012. If you decide to pay the tax in 2011 and 2012, you would report half the conversion amount in 2011 and the other half in 2012. The tax due would be based on your tax rate in those years. If you pay the tax in 2010, the tax would also be based on your tax rate in that year.
2.
The general rule for electing to take RMDs from a non-spouse inherited IRA is that one must begin distributions by the end of the calendar year following the owner's death. But there is also a special rule saying that RMDs from IRAs are suspended for 2009.
Does this mean that for deaths in 2008, a beneficiary may defer the (implicit) declaration to take RMDs until 2010 because there is no requirement to take an RMD in 2009? Or is there an exception to the exception -- that while most people do not have to take RMDs in 2009, those who just inherited an IRA must still do so in order to establish their intent to continue taking RMDs in the future?
Answer:
The suspension of RMDs for 2009 also applies to inherited IRAs. You are correct that a beneficiary may also defer the declaration to take RMDs until 2010. IRS has only just clarified this point in Notice 2009-82, released on September 24th.
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
Below is this week's Slott Report Mailbag.
1.
If you elect to convert an IRA to a Roth in the year 2010, when do you pay the taxes? Is it all due in the year 2010, is any of it due in the year 2010? Or do you pay the taxes in the year 2011 and 2012? Also, what is the tax rate? Is it based upon your 2010 tax return or is the tax rate based upon your 2011 or 2012 tax return?
Thanks,
Kathy Lane
Answer:
If you convert in 2010 you have the option to pay the tax due on the conversion in 2010 or if you don't pay it in 2010 you can pay the taxes in 2011 and 2012. If you decide to pay the tax in 2011 and 2012, you would report half the conversion amount in 2011 and the other half in 2012. The tax due would be based on your tax rate in those years. If you pay the tax in 2010, the tax would also be based on your tax rate in that year.
2.
The general rule for electing to take RMDs from a non-spouse inherited IRA is that one must begin distributions by the end of the calendar year following the owner's death. But there is also a special rule saying that RMDs from IRAs are suspended for 2009.
Does this mean that for deaths in 2008, a beneficiary may defer the (implicit) declaration to take RMDs until 2010 because there is no requirement to take an RMD in 2009? Or is there an exception to the exception -- that while most people do not have to take RMDs in 2009, those who just inherited an IRA must still do so in order to establish their intent to continue taking RMDs in the future?
Answer:
The suspension of RMDs for 2009 also applies to inherited IRAs. You are correct that a beneficiary may also defer the declaration to take RMDs until 2010. IRS has only just clarified this point in Notice 2009-82, released on September 24th.
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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*Copyright 2009 Ed Slott and Company, LLC
Wednesday, November 4, 2009
Financial Planning: Giving It Back
Ed Slott wrote a November 1st piece for Financial Planning titled, "Giving It Back." The piece dealt with Notice 2009-82, released by the IRS on September 24th of this year.
As Slott wrote: Notice 2009-82 affects individuals who normally would have been subject to RMDs from either a company plan or an IRA. Taxpayers receiving annuity payments from a qualified plan calculated over their lives alone, or their lives jointly or over a period of at least 10 years, also qualify for relief.
CLICK HERE TO READ THE ENTIRE ARTICLE IN FINANCIAL PLANNING.
Compiled by Ed Slott and Company
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*Copyright 2009 Ed Slott and Company, LLC
As Slott wrote: Notice 2009-82 affects individuals who normally would have been subject to RMDs from either a company plan or an IRA. Taxpayers receiving annuity payments from a qualified plan calculated over their lives alone, or their lives jointly or over a period of at least 10 years, also qualify for relief.
CLICK HERE TO READ THE ENTIRE ARTICLE IN FINANCIAL PLANNING.
Compiled by Ed Slott and Company
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
Tuesday, November 3, 2009
Retirement Fears: Advisor Mistakes Can Be Very Costly To Their Clients
Earlier this year the Financial Industry Regulatory Authority (FINRA) announced that it has fined a major investment company $3 million and ordered it to pay more than $4.2 million in restitution.
Two former registered representatives in its Rochester, NY branch office apparently persuaded Eastman Kodak and Xerox corporation employees to take early retirement based upon unrealistic promises of consistently high investment returns and by espousing unsuitable investment strategies.
FINRA said “at least 184 customers suffered financial hardships, including market losses, a reduction in principal, and the inability to sustain expected withdrawal rates. In many cases, the customer’s initial investment was eroded by market declines and the customer’s monthly withdrawals were not funded by income but were really distributions of principal. Some customers were forced to return to work at a greatly reduced income in order to meet their basic living expenses.”
We always stress the importance of dealing with a competent advisor and an advisor that has been trained in distributions from qualified retirement plans and IRAs. On our web site http://www.irahelp.com/, click on Find an Advisor, and you will find a list of competent advisors in your area that have been trained by Ed Slott and Company on all the current rules on distributions and traditional and Roth IRAs. A comfortable retirement starts with accurate IRA advice.
Another type of scheme is ensnaring many small businesses. One of them is a radio personality. We’ll call him I.M. Caught. Mr. Caught's accountant recommended a way to reduce his taxes. The plan went like this:
CLICK HERE TO READ ABOUT THE PLAN
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
Two former registered representatives in its Rochester, NY branch office apparently persuaded Eastman Kodak and Xerox corporation employees to take early retirement based upon unrealistic promises of consistently high investment returns and by espousing unsuitable investment strategies.
FINRA said “at least 184 customers suffered financial hardships, including market losses, a reduction in principal, and the inability to sustain expected withdrawal rates. In many cases, the customer’s initial investment was eroded by market declines and the customer’s monthly withdrawals were not funded by income but were really distributions of principal. Some customers were forced to return to work at a greatly reduced income in order to meet their basic living expenses.”
We always stress the importance of dealing with a competent advisor and an advisor that has been trained in distributions from qualified retirement plans and IRAs. On our web site http://www.irahelp.com/, click on Find an Advisor, and you will find a list of competent advisors in your area that have been trained by Ed Slott and Company on all the current rules on distributions and traditional and Roth IRAs. A comfortable retirement starts with accurate IRA advice.
Another type of scheme is ensnaring many small businesses. One of them is a radio personality. We’ll call him I.M. Caught. Mr. Caught's accountant recommended a way to reduce his taxes. The plan went like this:
CLICK HERE TO READ ABOUT THE PLAN
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
------------------------------------------------------------------------------
Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
Monday, November 2, 2009
Beware of Tax Shelters in IRAs
The American Jobs Creation Act of 2004 signed into law back on October 22, 2004 imposes a severe fine for suspected tax shelters.
This little known provision of the Act provides penalties for not reporting, "listed transactions." The penalty is steep at $100,000 for individuals and $200,000 for all others, including corporations. The penalty for listed transactions cannot be waived or rescinded.
A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction. These transactions are identified by IRS notice, regulation, or other form of published guidance as a listed transaction.
The IRS maintains a list of their listed transactions. A taxpayer with such a transaction, or something "substantially similar," must report it at tax time, generally April 15. If not, the tax law makes the fines almost automatic. It doesn't matter how much money was sheltered or whether the taxpayer knew about the IRS list.
For updates to the list, go to the IRS web page at www.irs.gov/businesses/corporations/index.html and click on Abusive Tax Shelters and Transactions.
IRS Form 8886, Reportable Transactions Disclosure Statement, is where reportable transactions are disclosed. It is referred to as the most expensive tax form because of the severe penalties. The instructions for Form 8886 detail listed transactions.
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
This little known provision of the Act provides penalties for not reporting, "listed transactions." The penalty is steep at $100,000 for individuals and $200,000 for all others, including corporations. The penalty for listed transactions cannot be waived or rescinded.
A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction. These transactions are identified by IRS notice, regulation, or other form of published guidance as a listed transaction.
The IRS maintains a list of their listed transactions. A taxpayer with such a transaction, or something "substantially similar," must report it at tax time, generally April 15. If not, the tax law makes the fines almost automatic. It doesn't matter how much money was sheltered or whether the taxpayer knew about the IRS list.
For updates to the list, go to the IRS web page at www.irs.gov/businesses/corporations/index.html and click on Abusive Tax Shelters and Transactions.
IRS Form 8886, Reportable Transactions Disclosure Statement, is where reportable transactions are disclosed. It is referred to as the most expensive tax form because of the severe penalties. The instructions for Form 8886 detail listed transactions.
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.
*Copyright 2009 Ed Slott and Company, LLC
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