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Old 12-14-2020, 07:01 PM   #21
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Originally Posted by jazztbone View Post
Thanks, cathy63, I stand corrected. You will not have to repay if you've already received a check. However, income over the threshold will prevent you from being able to claim it on your 2020 return, if you did not receive it based on 2019 income. So, it that case, it will be an effective tax increase.
There is an obscure situation where you might have to pay it back... if you received a stimulus payment based on being married and your spouse died before 2020 then my understanding is that they'll be asking for half of it back.
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Old 12-14-2020, 08:44 PM   #22
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Originally Posted by pb4uski View Post
There is an obscure situation where you might have to pay it back... if you received a stimulus payment based on being married and your spouse died before 2020 then my understanding is that they'll be asking for half of it back.
Yes, they did ask for half of the payment back if one spouse died before the stimulus payment was received. In that case, you were supposed to send a check directly to the IRS though. There's no way to reconcile that situation on the 1040.
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Old 12-14-2020, 10:12 PM   #23
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An alternate plan for those high medical expenses just came to me. If life goes smoothly, I will probably pass on a good amount of highly appreciated mutual funds, that today would get a stepped up basis, but may not in the future. And if I do need expensive care, I may have to sell some of those anyway, so that's income I can write the medical expenses against. So I'm leaning against keeping some of my tIRA unconverted, though if I'm not able to get it all done I'm not going to push it.
That is a good thought!

On reflection, it does not help me much. I am Bernstein's "Sheltered Sam." Only ~4% of my stash is in taxable equities! But a good idea for the right profile.
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Old 12-15-2020, 08:57 AM   #24
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Originally Posted by pb4uski View Post
There is an obscure situation where you might have to pay it back... if you received a stimulus payment based on being married and your spouse died before 2020 then my understanding is that they'll be asking for half of it back.
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Originally Posted by cathy63 View Post
Yes, they did ask for half of the payment back if one spouse died before the stimulus payment was received. In that case, you were supposed to send a check directly to the IRS though. There's no way to reconcile that situation on the 1040.
It's my understanding that there is no REQUIREMENT to return that money. The IRS has "asked" people to return it. And made statements like, people "should" return it. But the fact remains that the CARES Act had no clawback provision whatsoever. So there is no statutory basis for those requests, which I suppose is why they are using weak language. I keep thinking the next stimulus bill will clean this up and/or clarify the situation. But the federal government is so dysfunctional right now, I'm not sure when or if that will ever happen. So for now, I continue to advise DMIL to hang on to the extra $1200.
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Old 12-15-2020, 09:17 AM   #25
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I suspect that the CARES act probably says $1,200 for a single and $2,400 for a couple, so there wouldn't need to be a specific provision for a clawback for a mistaken payment. IOW, your DMIL and my friend are not legally entitled to the extra $1,200.

Now how aggressively the IRS will chase these mistaken payments is a whole different question. I wouldn't be surprised if refunds were reduced for it.
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IRMAA Lesson Learned...
Old 12-15-2020, 09:20 AM   #26
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IRMAA Lesson Learned...

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Originally Posted by RunningBum View Post
The issue I have with that is that those large medical expenses will probably be due to memory or assisted care. I would likely have a number of years of RMDs that would whittle down my tIRA, while those RMDs are taxed and perhaps triggering IRMAA before I have the high med expenses.
(My) Ignorance is NOT bliss.

I didn't look into IRMAA until I recently got SSA notification that I'd be paying the first level upcharge for Part B & D. No problem.

Got my conversion to top of bracket nailed down perfectly but I didn't stop to calc my 2020 MAGI and did my last (large) Roth conversion 12/3. Only to realize a few days ago that put me about $6K over the next level IRMAA upcharge --- so I get to pay 200% in 2022 instead of 140% like in 2021...

I'll get 2021 (for 2023) correct.

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Old 12-15-2020, 09:21 AM   #27
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Yes,
Due to a large conversion last year, we missed the Stimulus payment, so I'm aiming this year to hit the $150K mark.
Besides getting the missed stimulus payment, I'm thinking they may still send out another based on 2020 tax yr.
So 2019 Roth conversions that put you above 150k meant you were at least into the phase out. It goes down $100 for each $1,000 over $150k, so it's gone by $174k? Of course since there's no clawback, if you got the stimulus and this year did a big conversion, you'd keep stimulus check, unscathed. The Roth conversion decision for people who are converting now includes an open question about if there will be another stimulus check, and what the limits will be. For those managing ACA levels, it's not an issue, but to more aggressive converters, it's a "thing" I had not thought about until the topic came up here.
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Old 12-15-2020, 09:41 AM   #28
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Originally Posted by pb4uski View Post
I suspect that the CARES act probably says $1,200 for a single and $2,400 for a couple, so there wouldn't need to be a specific provision for a clawback for a mistaken payment. IOW, your DMIL and my friend are not legally entitled to the extra $1,200.

Now how aggressively the IRS will chase these mistaken payments is a whole different question. I wouldn't be surprised if refunds were reduced for it.
They were in fact a "couple" in 2018, which was the tax year used to determine their eligibility for a payment.

Also, DMIL has no refunds to take it out of. Her only income is SS and a tiny RMD. She has no tax liability, although I continue to file her return every year, which is why she got the check.

So, if they want the money, they'll need to go out knocking on doors, which will never happen. If they revise the law and make it clear that returning the money is REQUIRED by law, then of course we will comply at that time.

Until then, this is one of those things that keeps me mildly amused during a global pandemic.
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Old 12-15-2020, 11:39 AM   #29
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As someone mentioned before, we plan on keeping a decent fraction of our IRA in taxable status - to take advantage of the tax offset for the inevitable large medical expense.

In a real time example, helping my parents now with considering a move into a Long Term Continuing Care Retirement Community. They have about a 60/40 split of brokerage / IRA (taxable funding). The LTC uses about 40% of the upfront fee and monthly charges for medical expenditures - which means that anything above 10% income of that 40% is deductible.

End result, they will pay 40% of the entry fee from their IRA with very little tax consequence. The rest comes from brokerage.
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Old 12-15-2020, 11:52 AM   #30
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When working and I could do IRA contributions I tried to make them early in the year to get the entire year of market gains. I carried this over to Roth conversions and made my conversions in Jan so I missed opportunity to grab the stimulus
Another reason why tax planning is so difficult! You never know what curve they'll throw at us next.
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Old 12-15-2020, 01:00 PM   #31
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Got my conversion to top of bracket nailed down perfectly but I didn't stop to calc my 2020 MAGI and did my last (large) Roth conversion 12/3. Only to realize a few days ago that put me about $6K over the next level IRMAA upcharge --- [COLOR=Red]so I get to pay 200% in 2022 instead of 140% like in 2021...
Probably, but maybe not.

The IRMAA surcharge income levels are indexed to inflation starting this year. So two years hence, the second level IRMAA upcharge level could be about $6K higher. If you're MFJ (can't recall if you are or not), then it almost certainly will be $6K higher. It'll depend on inflation between now and then.

If you want to try to avoid it and if you qualify and if you haven't already done so, you could make an HSA contribution which would reduce your AGI. Also realizing any capital losses if you have any.
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Old 12-15-2020, 03:28 PM   #32
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Probably, but maybe not.

The IRMAA surcharge income levels are indexed to inflation starting this year. So two years hence, the second level IRMAA upcharge level could be about $6K higher. If you're MFJ (can't recall if you are or not), then it almost certainly will be $6K higher. It'll depend on inflation between now and then.

If you want to try to avoid it and if you qualify and if you haven't already done so, you could make an HSA contribution which would reduce your AGI. Also realizing any capital losses if you have any.
Didn't realize that, though it looks like I still screwed up in that it only went up $4K 2021 vs 2020 - and I am more than $6K over the 2021 (for 2019) threshold.

I couldn't find a 2022 (for 2020) table, presumably they come out later. I don't think an HSA contribution or capital losses will save me, but good thoughts.

But I hope you're right.
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Old 12-15-2020, 04:14 PM   #33
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^ Yeah, I was also sorta hoping you were looking at 2020 levels and would therefore have two years of inflation adjustments to help you.

Not sure I understand your comment about capital losses and HSA contributions. You still have until the end of this year to do those and affect your 2020 AGI. If you don't have capital losses or don't qualify for an HSA, or the IRMAA adjustment isn't enough to hassle over, then OK, sure. But they certainly would work if you did either or both of them to the tune of $6K (or even a little less if you want to rely on next year's inflation adjustment to save you).
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Old 12-16-2020, 01:28 PM   #34
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As someone mentioned before, we plan on keeping a decent fraction of our IRA in taxable status - to take advantage of the tax offset for the inevitable large medical expense.

In a real time example, helping my parents now with considering a move into a Long Term Continuing Care Retirement Community. They have about a 60/40 split of brokerage / IRA (taxable funding). The LTC uses about 40% of the upfront fee and monthly charges for medical expenditures - which means that anything above 10% income of that 40% is deductible.

End result, they will pay 40% of the entry fee from their IRA with very little tax consequence. The rest comes from brokerage.
This is surely a great tax benefit that offets/shelters tIRA distributions and RMDs from Federal income taxes. Is the 40% figure calculated and given in a formal letter or notice to CCRC residents initially upon entry into the CCRC and then later annually/end of year for monthly maintenance/membership fee expenses? And, regarding the entry fee, your parents fee is non-refundable, right?
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