Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-29-2009, 09:53 PM   #41
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,758
Quote:
Originally Posted by harley View Post
Not sure how difficult it would be to recharacterize, but I think if you held on to all the appropriate paperwork it wouldn't be too hard.
Harley,
You're right it's not that difficult, however, it is a small hassle.

You have to contact the IRA Administrator and tell them what you want to re-characterize. They need to figure out what the earnings are on the amount to be re-characterized and issue the IRS paperwork, which you then use to complete or amend a tax return. And, you need to do it within the IRS timeline, to avoid penalties.

-- Rita
__________________

__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-31-2009, 09:08 AM   #42
Recycles dryer sheets
oma's Avatar
 
Join Date: Mar 2007
Location: Tampa/St Petersburg, FLA
Posts: 312
Curious if any of you use/go to tax advisors for these types of conversions. I usually use some basic tax program each year (HR Block) but it appears that you have to have specialize tax knowledge to complete these types of conversions.
__________________

__________________
oma is offline   Reply With Quote
Old 12-31-2009, 10:50 AM   #43
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,758
Actually you don't need anything but a basic tax program to complete the entries on the IRS forms and calculate the taxes.

The question to consider in these conversions are: (1) do I convert the entire thing, or (2) do I convert a part of the account?

IRS form 8606 is the one you want to look at to follow the calculations, or, test it out in your HRBlock software.

-- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 01-01-2010, 07:45 PM   #44
Confused about dryer sheets
 
Join Date: Dec 2009
Location: Cleveland
Posts: 3
Dave,

I don't think you can net them, so you would have to pay tax on your entire $4k gain. This isn't a bad deal though. You pay tax on $4K and convert to Roth then accumulates tax-free for the rest of your life and the beneficiaries life.

To claim the loss on your wife's IRA you would have to sell the assets in the IRA and at only a $500 loss it isn't worth it as to be deductible any way it is an itemized deduction subject to 2% limitation.

I would just convert them both and pay the tax.

Keep in mind, if your income is currently too high to fund Roth IRA's you could continue to fund nondeductible IRA's even after the conversion and then convert them annually to Roth IRA's. This basically removes the income limitation for you as long as you don't also have other taxable IRA assets.

Please note you didn't mention if you have other taxable IRA's other than your nondeductible IRA, if you do whenever you convert an IRA to a Roth the conversion most of the conversion would be taxable only the portion of the conversion pro ratably allocable to the nondeductible basis would be tax-free.
__________________
Matt in OH is offline   Reply With Quote
Old 01-05-2010, 02:00 AM   #45
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,971
I have a rollover IRA that I would really like to put into my ROTH at Vanguard. Do I just call Vanguard and give them the account number from the other company and they take it from there? Come tax time, are there extra forms I have to fill out or do I just put in the amount on line 11 of my 1040A form? If all I have to do is make a call to Vanguard and then fill in 1 extra line on my tax form then i'll definitly do it. I can do half in 2010 and half in 2011 and still stay in my normal tax bracket
__________________
aaronc879 is online now   Reply With Quote
Old 01-05-2010, 06:58 AM   #46
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,219
Quote:
Originally Posted by aaronc879 View Post
I have a rollover IRA that I would really like to put into my ROTH at Vanguard. Do I just call Vanguard and give them the account number from the other company and they take it from there? Come tax time, are there extra forms I have to fill out or do I just put in the amount on line 11 of my 1040A form? If all I have to do is make a call to Vanguard and then fill in 1 extra line on my tax form then i'll definitly do it. I can do half in 2010 and half in 2011 and still stay in my normal tax bracket
I would (to keep things simple) call them to open a regular IRA (it will be empty but VG will give you an account #), you give this acct # to the other company (they will have a "rollover" form), after that is successful, then rollover part of your IRA->Roth. Otherwise you have to give 2 acct #s to the other company who is losing its motivation help you, I foresee problems...
TJ
__________________
teejayevans is offline   Reply With Quote
Old 01-05-2010, 08:10 AM   #47
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,925
Quote:
Originally Posted by aaronc879 View Post
I have a rollover IRA that I would really like to put into my ROTH at Vanguard. ... Come tax time, are there extra forms I have to fill out or do I just put in the amount on line 11 of my 1040A form?
If you ever made a non-deductible contribution in the past, you should fill out 8606 also. If not, use the 2 places on that line on 1040A.
__________________
kaneohe is offline   Reply With Quote
Old 01-05-2010, 10:46 PM   #48
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Quote:
Originally Posted by kaneohe View Post
Dave,

Since you have non-deductible IRAs (that's all you have , right?), you would report the gains/earnings or whatever you wish to call them over your basis
(non-zero since the IRA was non-deductible) if you cashed them out or if you converted to a Roth. You can't net the losses directly against the gains since they (losses) need to be reported on Sch A as a misc deduction subject to a 2% of AGI floor. You can't take the loss unless you have basis in the IRA and you have disposed of ALL of your TIRAs (or Roths) Deducting Losses on Your IRA Investments
Since your AGI is so high it is likely that you won't be able to deduct the loss at all since the 2% of AGI likely exceeds the loss.
Ok, this is helpful, thank you kaneohe.

To answer your question, "YES", all we have is non-deductibles...NONE of the money in either account was tax-deductible due to our high incomes.

It looks like I should convert mine this year for sure (I am assuming the market will go up, and therefore converting this year makes my gain smaller...as a matter of fact I should convert NOW since I calculate the gain based on the date of the conversion...not the end of the tax year). As for my wife's account...I could wait until it increases, or I could convert now, really doesn't matter...so long as I don't let it appreciate too much to where I will show a gain and then be taxed on it.

You are right that any loss would be so small I'd never reach the 2% limit.

I'll keep reading, but it looks like I should convert both ASAP, pay the taxes on my gain (the gain is only about $4k, so the tax bill is not outrageous), and then enjoy tax free distributions later.

My plan for every year from now until rehirement is to fund a non-deductible TIRA for both wife and I, and immediately convert to a Roth...thus essentially building our tax-free portion of our portfolio.
__________________
Finance Dave is offline   Reply With Quote
Old 01-05-2010, 11:02 PM   #49
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Quote:
Originally Posted by Matt in OH View Post
Dave,

I don't think you can net them, so you would have to pay tax on your entire $4k gain. This isn't a bad deal though. You pay tax on $4K and convert to Roth then accumulates tax-free for the rest of your life and the beneficiaries life.

To claim the loss on your wife's IRA you would have to sell the assets in the IRA and at only a $500 loss it isn't worth it as to be deductible any way it is an itemized deduction subject to 2% limitation.

I would just convert them both and pay the tax.

Keep in mind, if your income is currently too high to fund Roth IRA's you could continue to fund nondeductible IRA's even after the conversion and then convert them annually to Roth IRA's. This basically removes the income limitation for you as long as you don't also have other taxable IRA assets.

Please note you didn't mention if you have other taxable IRA's other than your nondeductible IRA, if you do whenever you convert an IRA to a Roth the conversion most of the conversion would be taxable only the portion of the conversion pro ratably allocable to the nondeductible basis would be tax-free.
Great timing Matt....I posted my prior comment before reading your response, and we're on the same page.

I do not have any taxable IRAs. I used to, but years ago I converted them to Roths and they've been in the Roths ever since. I wish I would have had the Roth more available to me, but unfortunately it was introduced later in my working life, and the income restrictions kept me from participating much of the time. I only have about $80k in Roths today, and after my additional conversion being discussed here it will be about $100k....not as much as I'd like to have.

Wife and I have about 5 more years of *ork, so maybe we can get that to $200k through combination of contributions (both regular and catch-up) and growth. After that, it will be time to wave to my boss politely and drive off (rather than sail off...I'm a car guy not a boat guy) into the sunset.

Now, if I can just find a low-cost producer of suntan lotion.
__________________
Finance Dave is offline   Reply With Quote
Old 01-06-2010, 07:57 PM   #50
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,418
Quote:
Originally Posted by Finance Dave View Post
Great timing Matt....I posted my prior comment before reading your response, and we're on the same page.

I do not have any taxable IRAs. I used to, but years ago I converted them to Roths and they've been in the Roths ever since. I wish I would have had the Roth more available to me, but unfortunately it was introduced later in my working life, and the income restrictions kept me from participating much of the time. I only have about $80k in Roths today, and after my additional conversion being discussed here it will be about $100k....not as much as I'd like to have.

Wife and I have about 5 more years of *ork, so maybe we can get that to $200k through combination of contributions (both regular and catch-up) and growth. After that, it will be time to wave to my boss politely and drive off (rather than sail off...I'm a car guy not a boat guy) into the sunset.

Now, if I can just find a low-cost producer of suntan lotion.
Amazon.com: NO-AD Sunscreen Lotion, SPF 8, 16 Ounces: Health & Personal Care
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Converted today
Old 01-07-2010, 11:17 AM   #51
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,229
Converted today

Converted my TIRA to a Roth this morning. Schwab made it very easy. Opened the Roth on line Monday. Funded the TIRA on Tuesday for 2010 and then waited for the transaction to clear today. Went on line made a few clicks and viola....I have a funded Roth! Never have been able to contribute to a Roth because of wage limits so this one time conversion option was a blessing.

Haven't decided on when to pay the taxes. Probably will do it in 2010 (as opposed to the spreading over 2011 and 2012) as I fear Pelosi and crew have nothing but higher taxes in mind for 2011 and beyond.
__________________
RockyMtn is offline   Reply With Quote
Old 01-07-2010, 01:07 PM   #52
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,074
Quote:
Originally Posted by RockyMtn View Post
Went on line made a few clicks and viola....I have a funded Roth!
So, you had to pull a few strings...

Seriously though, that sounds great - I plan to do similar this weekend so am pleased to hear how easy it is.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 01-07-2010, 01:15 PM   #53
Thinks s/he gets paid by the post
ronin's Avatar
 
Join Date: Oct 2003
Posts: 1,190
Nuts and bolts question... How do you handle the estimated tax payments? I've read the relevant IRA publication and looked at form 2210 and am going to query my tax prep guy, but not 100% sure how to handle it. Could be a one off deal like in Dec or Jan, or could have a monthly early retirement incentive rollover that could be converted immediately monthly. Got to figure State of Kalieffingornia withholding as well.
__________________
We are, as I have said, one equation short. Keynes
ronin is offline   Reply With Quote
Old 01-07-2010, 02:54 PM   #54
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by RockyMtn View Post
Converted my TIRA to a Roth this morning. Schwab made it very easy. Opened the Roth on line Monday. Funded the TIRA on Tuesday for 2010 and then waited for the transaction to clear today. Went on line made a few clicks and viola....I have a funded Roth! Never have been able to contribute to a Roth because of wage limits so this one time conversion option was a blessing.

Haven't decided on when to pay the taxes. Probably will do it in 2010 (as opposed to the spreading over 2011 and 2012) as I fear Pelosi and crew have nothing but higher taxes in mind for 2011 and beyond.
your post implies to me that your TIRA is funded with after tax money, some or all. if this is true you may not have any taxes due because of the conversion.
__________________
jdw_fire is offline   Reply With Quote
Old 01-07-2010, 08:58 PM   #55
Confused about dryer sheets
 
Join Date: Dec 2009
Location: Cleveland
Posts: 3
Quote:
Originally Posted by Finance Dave View Post
Great timing Matt....I posted my prior comment before reading your response, and we're on the same page.

I do not have any taxable IRAs. I used to, but years ago I converted them to Roths and they've been in the Roths ever since. I wish I would have had the Roth more available to me, but unfortunately it was introduced later in my working life, and the income restrictions kept me from participating much of the time. I only have about $80k in Roths today, and after my additional conversion being discussed here it will be about $100k....not as much as I'd like to have.

Wife and I have about 5 more years of *ork, so maybe we can get that to $200k through combination of contributions (both regular and catch-up) and growth. After that, it will be time to wave to my boss politely and drive off (rather than sail off...I'm a car guy not a boat guy) into the sunset.

Now, if I can just find a low-cost producer of suntan lotion.
Dave,

Congrats to you on the retirement plan. I have been funding Roth IRA's for a few years and converted a good chunk last year and have a bout $60K in total for me and my wife. We are unfortunately decades from retirement and unfortunately (fortunately depending on how you look at it) no where near exceeding the limit on funding Roth IRA's so we will continue.

My plan is hopefully to have just the right amount of Roth assets so my taxable assets withdrawn at retirement will just generate enough income each year to utilize my tax deductions or at a minimum keep my taxable income in the low brackets. This is how Roth's provide flexibility. Roth's also provide an opportunity in those few years right at retirement to start taking taxable account withdrawls just enough to stay in the lower rates, any additional withdrawls you may need can be taken from the Roth if need be.

I also just wanted to point with your Roth conversion, in case you are not aware but there is a special rule just for 2010 that any Roth IRA conversion income is deemed to be half recognized in 2011 and the other half in 2012, which allows you to postpone paying the taxes on 2010 conversion. This is the default but you could make an election with your 2010 tax return to claim the income in 2010 if you want. In your case, you may want to make this election as you are likely in the one of the higher two tax brackets (33% and 35% are the current top two) and these are set to go back to prior levels and the highest tax rate for 2011 will be atleast raised to 39.6%. So in your case if you don't make the election $2K of gain will be taxed at 2011 rates and the other $2K would be taxed at 2012 rates. You will have until you file your 2010 return to decide when and how you want to pay the tax. This shouldn't deter, but just wanted to point it out.
__________________
Matt in OH is offline   Reply With Quote
Old 01-08-2010, 05:16 PM   #56
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,229
Quote:
Originally Posted by jdw_fire View Post
your post implies to me that your TIRA is funded with after tax money, some or all. if this is true you may not have any taxes due because of the conversion.
Some pre tax some after tax.
__________________
RockyMtn is offline   Reply With Quote
Old 01-09-2010, 08:18 PM   #57
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Quote:
Originally Posted by Matt in OH View Post
Dave,

Congrats to you on the retirement plan. I have been funding Roth IRA's for a few years and converted a good chunk last year and have a bout $60K in total for me and my wife. We are unfortunately decades from retirement and unfortunately (fortunately depending on how you look at it) no where near exceeding the limit on funding Roth IRA's so we will continue.

My plan is hopefully to have just the right amount of Roth assets so my taxable assets withdrawn at retirement will just generate enough income each year to utilize my tax deductions or at a minimum keep my taxable income in the low brackets. This is how Roth's provide flexibility. Roth's also provide an opportunity in those few years right at retirement to start taking taxable account withdrawls just enough to stay in the lower rates, any additional withdrawls you may need can be taken from the Roth if need be.

I also just wanted to point with your Roth conversion, in case you are not aware but there is a special rule just for 2010 that any Roth IRA conversion income is deemed to be half recognized in 2011 and the other half in 2012, which allows you to postpone paying the taxes on 2010 conversion. This is the default but you could make an election with your 2010 tax return to claim the income in 2010 if you want. In your case, you may want to make this election as you are likely in the one of the higher two tax brackets (33% and 35% are the current top two) and these are set to go back to prior levels and the highest tax rate for 2011 will be atleast raised to 39.6%. So in your case if you don't make the election $2K of gain will be taxed at 2011 rates and the other $2K would be taxed at 2012 rates. You will have until you file your 2010 return to decide when and how you want to pay the tax. This shouldn't deter, but just wanted to point it out.
Yes I was aware of the tax treatment and plan to pay it all in 2010...it's a fairly small amount.

Dave
__________________
Finance Dave is offline   Reply With Quote
Old 01-11-2010, 08:04 AM   #58
Recycles dryer sheets
JustNtime's Avatar
 
Join Date: Oct 2009
Posts: 150
Quote:
Originally Posted by ronin View Post
Nuts and bolts question... How do you handle the estimated tax payments? I've read the relevant IRA publication and looked at form 2210 and am going to query my tax prep guy, but not 100% sure how to handle it. Could be a one off deal like in Dec or Jan, or could have a monthly early retirement incentive rollover that could be converted immediately monthly. Got to figure State of Kalieffingornia withholding as well.
I did my conversion last month, but I made sure the tax I paid in 2009 was more than what I paid in 2008 for both state and feds. Yes, I will have a big tax bill to pay, but no underpayment penalties. For grins, I made an estimated tax payment to the state this weekend, since I could do it online without filling out any #$%@! forms and I had some funds laying around earmarked for this. I know making estimated tax payments to fed is no where near this easy - although I could have easily adjusted my pension withholdings to make the added payments. I played with turbotax this weekend and assured myself NO penalties would be assessed. So I have an interest free loan until the tax is filed in Apr.

If I do another conversion this year with paymnents split between 11/12. I could get some more interest free loans with some careful planning to avoid those underpayment penalties.

BTW: I'm looking at these tax payments as 'Roth IRA contributions' for last year. Since I'm using after tax money to pay the tax bill and I have no 'earned' income, it's the only way I know to add money to my Roth.
__________________
JustNtime is offline   Reply With Quote
Old 01-11-2010, 08:16 AM   #59
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,925
Quote:
Originally Posted by JustNtime View Post
. I know making estimated tax payments to fed is no where near this easy -
.
EFTPS: The Electronic Federal Tax Payment System
I haven't personally used this but I've read good things about it . Learned about it from someone here.
__________________
kaneohe is offline   Reply With Quote
Old 01-11-2010, 08:30 AM   #60
Recycles dryer sheets
JustNtime's Avatar
 
Join Date: Oct 2009
Posts: 150
Quote:
Originally Posted by kaneohe View Post
EFTPS: The Electronic Federal Tax Payment System
I haven't personally used this but I've read good things about it . Learned about it from someone here.
Well, I went there and before you can make a payment to the feds- you have to enroll - la dee dah - They can just wait for 'their' money...

Yes, Virginia is much more efficient and took their money without the la dee dah. In addition, you can file your taxes free there (after you get your numbers off your fed return) - just takes a partial reinput of some minimal data (after you're in their system). I double check their answer against the turbotax number and don't pay the state filing fee to turbotax. I've done it for last several years and don't understand why the feds can't do the same thing. It would probably put tons of people out of work and play havoc with the already shakey economy...
__________________

__________________
JustNtime is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Convert IRA to Roth in 2010 in my situation? soupcxan FIRE and Money 1 08-12-2009 09:34 PM
Strategy for Roth 401k to Roth IRA conversion and withdrawals sweng85 FIRE and Money 9 04-21-2009 11:28 PM
2010 conversion to Roth IRA js1000 FIRE and Money 2 02-18-2008 01:19 PM
T-IRA to Roth Conversion in 2010 Maurice FIRE and Money 20 11-04-2007 04:01 AM
?? for uber-savers, non-deductible IRA to Roth IRA in 2010 LOL! FIRE and Money 8 12-21-2006 01:25 AM

 

 
All times are GMT -6. The time now is 08:32 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.