Michael Devault

Also, take a look at Internal Revenue Code section 408(d)(4). Good luck!

First of all, TSAs and 403(B)s are generally considered the same thing. TSA is an acronym for Tax Sheltered Annuity, which is one type of funding medium used in 403(B) plans. The RMDs for each are calculated using the same process. However, once calculated, you must take distributions from each. In other words, distributions from IRAs cannot satisfy the distribution requirements of 403(B)/TSAs. Similarly, distributions from 403(B)/TSAs cannot be made to satisfy the distribuiton requirements of IRAs. If you have multiple IRAs, you should determine the RMD for each individually. Then, the total may be taken from one or more of the IRA accounts to satisfy your IRA distribution. The same process should be used for your TSAs/403(B) accounts. Calculated them individually and take the total from one or more TSA/403(B) account. Hope this helps.

Several years ago, deferred annuities were used to "fund" non-qualified deferred compensation programs. The tax deferred growth was an attractive accumulation vehicle in such plans. However, the Tax Reform Act of 1986 put the "ka-bosh" on that idea, because IRC Section 72(u) was added. Under that section, to the extent of contributions made after February 28, 1986 to a deferred annuity held by a corporation, the contract is generally not treated as tax purposes as an annuity contract. Instead, income on the contract is treated as ordinary income received or accrued by the owner during the taxable year. Good bye, income tax deferral! The National Underwriter Company has a couple of good sources of additional information. One is "The Annuity Handbook," and the other is "Tax Facts 1." Hope this is of some benefit to you.

Has anyone heard if the IRS is planning to publish Publication 571 for use in preparing 2000 tax returns? The most recent version available on their web site is the 1999 version. Thanks!

My interpretation of the discussion in IRS Pub 590 is that, if you're self employed, you must have positive earnings from self employment in order to contribute to a SEP. The limit on contributions is 15% of compensation. For the self employed, compensation is defined as net earnings from self employment. If net earnings is zero, so is compensation. Thus, the maximum contribution is 15% of zero.

I use a different definition of "qualified plan" than you. In my opinion, a qualified plan is one that meets the requirements of a particular section (or sections) of the internal revenue code. Pension plans, for example, must meed the requirements of section 401(a) in order to be considered "qualified." Following that line of reasoning, a 457 plan is a "qualified" deferred compensation plan because it meets the requirements of IRC section 457. This may not be right, but it helps keep things clear in my simple little mind. Hope it is of some benefit to you.

You may convert all or a portion of your traditional IRA to a Roth IRA, just as long as your modified Adjusted Gross Income is $100,000 and, if married, you do not file separate returns.

According to the instructions for Form 8606, you proceed as if you never contributed to the Roth IRA in the first place.

There is a 6% excise tax on excessive contributions made to a Roth IRA. However, if you withdraw the excess contribution, and earnings on the excessive contribution, on or before the due date (including extensions) for filing your income tax return, the amount withdrawn is treated as not contributed. You need to make sure that when you "backed out" the contribution, you also received earnings on the contribution.

Try prowling through the following site: http://www.tax.state.va.us/ Good luck!

The modified adjusted gross income ("MAGI") limit is used to determine current year contributions only. If your MAGI exceeds the limit this year, you can't contribute. However, it doesn't affect contributions made in past years. Those contributions may continue to remain in the Roth IRA. Hope this helps.

Since this isn't a presidential election, I want to change my vote to $25,500 after reviewing the worksheet to which mcdonnell refers.

Good points. Here's some information to think about: 1. The 60 day period seems to start when the taxpayer receives the distribution. In Letter Ruling 883043, the Service indicated that the 60 day period started on the date of receipt, even though the check had been issued 10 months earlier but delivery was delayed because of an incorrect address. 2. In Wood v. Commissioner, the Tax Court held that a timely rollover occurred when a corrective bookkeeping entry was made after the 60 day period, but the money was received within the 60 day period. I believe that this points out that constructive receipt is sufficient, but I certainly agree with John that good records be kept on when the money was received and when it was sent out. Sending it FedEx or by some other means that requires the recipient to sign is a good idea. Another good idea is to make sure the transaction is completed well within the 60 day time limit. There was some indication in the last tax bill that Congress wants to give the Treasury the ability to waive the 60 day requirement in some situations where the 60 day time limit is not met due to unusual circumstances. This will be a step in the right direction, since the IRS currently has no authority to waive the 60 day rule, even if they want to.

The law allows 60 days in which to roll distributions from one Roth IRA into another Roth IRA without taxes or penalties. But, you can only do it once per year on each Roth IRA.

I vote for $22,174. Net earnings from self employment excludes a deduction for the self employed's SEP contribution. That's why the normal 15% contribution rate is reduced to 13.0435%.

The lesser of $2,000 or 100% of includible compensation. In those instances where an individual contributed to an IRA on behalf of his/her nonemployed spouse, the deductible amount was the lesser of $2,250 or 100% of his includible compensation, reduced by his/her contributions to his/her own IRA. In other words, if you contributed $2,000 to your IRA, you could have contributed only $250 to the spouse's IRA.

You can contribute to either or both, just as long as the combined contribution does not exceed $2,000. If you contribute to a traditional IRA, your contribution may be deductible, based on the information you've given. Suggest you look at IRS Publication 590 to make certain. Remember, contributions for 2000 must be made by April 16, 2001. Hope this helps.

I believe that you'll need two additional forms to report the transaction. Form 8606 is used to report the conversion. Form 5329 is used to calculate the 10% penalty on the amount not converted. Hope this helps.

The 10% penalty on qualified plans is imposed under the authority of Internal Revenue Code section 72(t). That section also contains the allowable exceptions to the penalty, one of which is separation from service in or after the year in which the employee attains age 55.

Sorry, not under current law. Last year's proposed tax bill contained provisions that would have permitted such a transfer. And, it may re-surface in this year's tax legislation. Hope this helps.

As long as your AGI was below the threshhold in 1998, the year in which you converted the IRA, you're fine. The conversion was actually made totally in 1998. All you're doing is spreading the tax on that conversion over 4 years. Hope this helps.

Chip, your understanding of the amortization method is correct. The payment amount is determined at the time payments are to begin, and they don't change. With respect to your original question, I don't recall seeing any PLR or other IRS missive that addresses running out of money so quickly. I would like to believe, however, that the Service would understand that, when the account has been depleted, no additional income payments could be made, regardless of whether it happens in three or thirty years.

If an amount equal to that withheld for taxes is not put into the Roth IRA, it will be considered a distribution, subject to penalty. For example, if the traditional IRA is $1,000 and you withhold $200 for taxes, coverting the remaining $800, at the end of the year, you'll pay taxes on the full $1,000 distributed from the IRA, plus a 10% penalty on the $200 not converted. Continuing the example, you could pull $200 out of your pocket & put it into the Roth IRA so that $1,000 would be in it. Then, at tax-time, you'll owe taxes on the $1,000, and you'll have $200 credit from withholding to apply towards the tax. If you intend to put the full $1,000 in the Roth, I would suggest that you consider not having money withheld for taxes. That way, you'll have use of the $200 in the above example until tax time. Uncle Sam doesn't pay interest on amounts withheld! Hope this is of some benefit to you.

Your participation in a 403(B) plan does not affect your ability to contribute to a Roth IRA. What does matter is your federal income tax filing status and your adjusted gross income. If you file single and your AGI is less than $95,000, you may contribute $2,000 to a Roth IRA. If you file jointly with your spouse, the AGI limit goes up to $150,000. Take a look at IRS Publication 590 for more information. It's available on the IRS' website. Hope this helps.

I believe that for W2 purposes, you use the same definition as found in IRS Notice 87-16. If you can't find that notice on the web, e-mail me your fax number and I'll send you a copy.