Fiscal Cliff stress

[UtahSkier]

I suspect others here know what I am talking about.

It is late December, I have used the ETF estimates to determine this quarter's dividends. I enter all this into quicken and my tax program and then decide how much money to pull out of the IRA as income this year.

Filing my taxes as a couple, I need my income to be less than $64800 to qualify for the ACA (didn't call it Obamacare... so be happy) subsidy.

I set my targeted income to be $61,000, so I have a $4k buffer.

Last year, my subsidy was $6K and I set my income target to have a $2k buffer. A series of mistakes and misunderstandings had me get very, very close to the subsidy income limit.

This year's penalty for exceeding the ACA fiscal cliff will be $17K. Pretty substantial amount.

I have been like Santa checking, double checking and checking again that All my data is correct.

The last transfers have been made and no changes can be made. Now, I have to wait until early February when all the 1099s have arrived.

 

[zinger1457]

There was another thread discussing this issue. Are you aware that you have 60 days to reverse an IRA withdrawal (all or a portion of it)? Seems like you could use that option if needed for an IRA withdrawal made at the end of the year to make sure your income stays under the limit.

 

[RunningBum]

Yep. How close do I dare get with Roth conversions, is my quest. It was easy before, since I could do a recharacterization to pull me back up the cliff, but that is gone. The tricky part is VG Total International. You don't know how much foreign taxes will add to the dividends distributed, so it's impossible to get right on the edge. It's probably about 7%, but I am multiplying by 1.08 to give myself a buffer, and still staying a bit off the edge. Not worth trying to squeeze every penny of a conversion to risk losing the subsidy.

 

[RunningBum]

There was another thread discussing this issue. Are you aware that you have 60 days to reverse an IRA withdrawal (all or a portion of it)? Seems like you could use that option if needed for an IRA withdrawal made at the end of the year to make sure your income stays under the limit.

Looking back at Utah's intro post 7 years ago, I think he is 57, like me, not able to do withdrawals yet.

 

[UtahSkier]

There was another thread discussing this issue. Are you aware that you have 60 days to reverse an IRA withdrawal (all or a portion of it)? Seems like you could use that option if needed for an IRA withdrawal made at the end of the year to make sure your income stays under the limit.

It is an inherited IRA. There is no reverse option allowed for this type.

Does anyone know about reversing 401K withdrawals? That would give me some flexibility.

 

[UtahSkier]

Yep. How close do I dare get with Roth conversions, is my quest. It was easy before, since I could do a recharacterization to pull me back up the cliff, but that is gone. The tricky part is VG Total International. You don't know how much foreign taxes will add to the dividends distributed, so it's impossible to get right on the edge. It's probably about 7%, but I am multiplying by 1.08 to give myself a buffer, and still staying a bit off the edge. Not worth trying to squeeze every penny of a conversion to risk losing the subsidy.

Yes, the foreign tax as Dividend was one of my major misunderstandings of last year. My etfs pay about $900 in foreign taxes each year. I now know to include that amount as an unpaid dividend.