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IRS is looking at your largeish IRA
Old 11-20-2014, 12:03 PM   #1
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IRS is looking at your largeish IRA

As I have long expected, the feds are getting itchy about all of that money that you have stashed in your IRA.

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In 2014, the federal government will forgo an estimated $17.45 billion in tax revenue from IRAs, which Congress created to ensure equitable tax treatment for those not covered by employer-sponsored retirement plans. Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of unduly large balances, the GAO noted. But concerns have been raised about whether the tax incentives encourage new or additional saving. Congress is re-examining retirement tax incentives as part of tax reform. The GAO was asked to measure IRA balances and assess IRS enforcement of IRA laws.
http://www.financial-planning.com/ne...8a%3A&st=email
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Old 11-20-2014, 12:12 PM   #2
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So that's around 1% of total tax revenue, right? Not enough to justify any major changes, I think.
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Old 11-20-2014, 12:16 PM   #3
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1% of the federal revenue is probably a lot of money. Just sayin...
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Old 11-20-2014, 12:32 PM   #4
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Since I don't have a $100MM IRA, I will not spend a lot of time sweating this one...
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Old 11-20-2014, 12:35 PM   #5
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The problem isn't tIRAs, but Roth IRAs. The taxable accounts will defer the tax for many years, but will eventually convert long term capital gains into ordinary income. The mega IRAs will have mega RMDs which will be taxed at high rates. The Roth IRAs however are the "problem" as the long term capital gains are converted into tax free income!

Congress and therefore the IRS, look at shorter term revenue affects of their actions. In theory, the IRA will generate net revenues as the capital gains are turned into ordinary income. The problem is that the conversion is deferred too far into the future to get included in the CBO scoring of tax bills. Roth IRAs were a net revenue gain when passed since the tax was collected up front. Now that Congress has spent that money, they want to collect on the back end as well.

We are all to blame as w keep electing these people!


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Old 11-20-2014, 12:40 PM   #6
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We are all to blame as w keep electing these people!
We the people are all learning how powerful a pen and a phone can be.
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Old 11-20-2014, 12:49 PM   #7
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Did we just cross into politics?


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Old 11-20-2014, 12:54 PM   #8
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Originally Posted by brewer12345 View Post
Since I don't have a $100MM IRA, I will not spend a lot of time sweating this one...
The problem is that they won't stop there. See the AMT....

The proposal previously floated by the administration would have foreclosed DW from contributing to 401k--and she also is a couple of orders of magnitude from 100MM.
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Old 11-20-2014, 01:01 PM   #9
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They might limit the mega backdoor Roth IRA thing some of us are now doing (shoveling $25,000 to $30,000 into a Roth tax free every year) but I doubt they would ever change the way the Roth works on distribution (tax free).

I am a bit sad we will ER before really getting long term use of the mega Roth. It would have been nice to have a few million in a Roth when you hit official retirement age.
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Old 11-20-2014, 01:04 PM   #10
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Other than ferreting out illegal transactions, is the concern that high balance IRA holders may have future contributions limited or that there may be some type of excise tax on existing balances?

-gauss
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Old 11-20-2014, 01:06 PM   #11
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I am a bit sad we will ER before really getting long term use of the mega Roth. It would have been nice to have a few million in a Roth when you hit official retirement age.
Would be nice to have a few million in ANY account...
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Old 11-20-2014, 01:09 PM   #12
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Hey, maybe we'll get lump sum deals from the feds to get our money out of the IRA's. Just like all the annuity buyouts being offered. Take it all out now and save 10% of the taxes or something.
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Old 11-20-2014, 01:14 PM   #13
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Hey, maybe we'll get lump sum deals from the feds to get our money out of the IRA's. Just like all the annuity buyouts being offered. Take it all out now and save 10% of the taxes or something.
+1 I like a sale.

Perhaps they could structure it so that large conversion/withdrawals do not elevate you to a higher tax bracket.

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Old 11-20-2014, 01:22 PM   #14
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This isn't intended to be a political comment. I'm intending to provide some historical insight on what our wonderful elected leaders have done/could do to raise money.

During the Depression there was a very high "retained earnings tax" that crippled small businesses and depressed their ability to accumulate capital for investment.

When SS was implemented, it hit people and companies with several years of contributions before anyone was eligible for any benefits (it was always a pay as you go system).

Tax rates were routinely increased at all levels. I can't remember where it topped out before WWII but I think it was 85%. It got higher during WWII. There were calls to tax income at 100% above $25,000/yr. Collecting SS out of people's paychecks was so good for the government they decided to "help" people plan for paying their taxes by including withholding for income taxes.

The proposed Obama budget includes speedup withdrawls from inherited IRAs and Roth IRAs. The goal is increased and earlier tax revenue. I have no comments about whether this is good or bad and I don't wish to hear yours.

I don't want this to be taken as anything other than there is no bounds to the desire of any beauracracy to increase the intake of tax revenue.
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Old 11-20-2014, 01:24 PM   #15
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Originally Posted by mickeyd View Post
We the people are all learning how powerful a pen and a phone can be.
My feeling is that the phone and the pen are worthless. The GAO is encouraging the IRS to do something. If I write to congressman Bob or senator Sam they won't dare cross either or those entities. The outcome will be that the IRS aims at the guy with the mega millions, but will end up costing me more in taxes.
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Old 11-20-2014, 01:27 PM   #16
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My feeling is that the phone and the pen are worthless. The GAO is encouraging the IRS to do something. If I write to congressman Bob or senator Sam they won't dare cross either or those entities. The outcome will be that the IRS aims at the guy with the mega millions, but will end up costing me more in taxes.
The unfortunate aspect of any tax intended for "the rich" inevitably falls on the middle class sooner rather than later. There really isn't that much money available if any tax is just restricted to "the rich." I think that the original intent of the income tax was to just hit the top 2%. How'd that work out for all of us?
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Old 11-20-2014, 02:18 PM   #17
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Old 11-20-2014, 03:08 PM   #18
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Did we just cross into politics?


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Yes , however , I don't think you can separate the two from this discussion
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Old 11-20-2014, 03:14 PM   #19
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For those interested in the GAO report

U.S. GAO - Individual Retirement Accounts: IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed

http://gao.gov/assets/670/666595.pdf
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Old 11-20-2014, 03:18 PM   #20
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Shouldn't the subject be "Congress is looking at your largeish IRA"??

Why blame the dummy, when the ventriloquist is in control?
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