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Found 17 results

  1. I have read many posts from several different sites and still confused.... My old company where I had 10 years of retirement service has made a Lumpsum distribution offer for $176,600 giving me option of direct roll over to IRA(Roth & traditional) OR Cash payment. My current employer has reduced my pay by 10% due to Covid downturn so i do qualify under CAES for 3-year deferred tax treatment for $100,000. What I want to do is roll over entire $176,600 to Roth while taking advantage of 3 - year tax deferment...i.e. Roll over entire $176,600 in 2020 to Roth. While claiming only $76,600 + 1/3 of $100,000 as income this year (it may be complicated form that i would have to fill but net effect would be this) Add 1/3 of $100,000 as my income in subsequent 2021 & 2022 tax years. I have opted for Cash payment to me so that i would have maximum flexibility. Question #1: Is That possible and How? Question #2: Assuming answer to 1st is yes, What will be addition to my taxable income for state taxes: Same as federal i.e. $76,600 + 1/3 of $100,000 OR entire $176,000 will be added Thanks. Talat
  2. Last year, I had significant capital losses in a cash management account held at Merrill Lynch. I used the $3,000 last year as a way to reduce my taxable income and I still have several thousands that I can roll into 2019 tax year. My question is, can I use those losses to offset a conversion of funds from my traditional IRA to my roth IRA? Assuming I transfer 10,000 dollars from my traditional IRA into my roth, and assuming I have a tax rate of 25%, that $2,500 would essentially be nullified by my $3,000 capital loss carryover? Am I correct with this assumption or do the capital losses have to come from one of the ira accounts?
  3. It appears that Roth 403(b) contributions in included in the W2 Box 1 calculation of wages and also noted with code BB in box 12. Can the employee Roth 403(b) contribution be used to satisfy the earned income test associated with making contributions to a outside traditional or Roth IRA. Said another way... Assuming no other earned income, if MFJ, can a $13K after tax employee contribution to a Roth 403(b) be used to meet the earned income test to allow additional 2x6.5k contributions to a couple's Roth IRAs?
  4. Suppose employee X works 1/1 through 6/30 for employer A and defers the 402(g) limit in employer A's 401(k) plan, then goes to work for employer B and defers the 402(g) limit in employer B's 401(k) from 7/1 through 12/31 of same year. Assume employee X does not take steps to have any portion of the deferrals for the year from either plan distributed to him/her by the April 15 of the following year. If both deferral episodes were pre-tax, then the IRS aggregates the amounts from the W-2 data it gets from employers A and B with respect to employee X , includes the excess in employee X's gross income, and adjusts employee X's 1040. Because the amounts were allocated to employee X's pre-tax account in both employer A's and B's 401(k) plans, when they are later distributed (presumably, with earnings), it's reported as taxable on employee X's 1099-R's, so you have the archetypal double tax that you can only avoid by utilizing the process to have the excess deferrals distributed (notifying the plan(s) by April 15 of following year), which in this example employee X did not do. But what if employee X had elected Roth elective deferrals for the amounts under both plans? The amounts are already reported in employee X's W-2's as gross income, so there should be no adjustment to his/her 1040. To the extent there is asymmetry in the treatment of pre-tax vs. Roth excess deferrals, seems like what the IRS would need to do is notify the employer that the excess Roth deferrals had been made and that those should be moved by the employer, as plan administrator, with earnings, out of the employee's Roth account and into his/her pre-tax account. But boy, that would be complicated and I have not seen anything explaining the requirement to do this. There is an example on page 19 of the current W-2 instructions that involves an excess Roth deferral under a plan of a single employer, but it doesn't touch the administrative issue that exists where the Roth elective deferrals occurred under plans of different employers. IRC sec. 402A(d)(3) pretty clearly says that employee X is going to be taxable on the amounts attributable to the excess deferrals, but how are the administrators of employer A's and B's plans going to know to report as taxable? Is employee X simply on his/her honor? (Both to do the right thing and to study tax law in the evenings so he/she will even understand this?) Maybe there is a clear answer to this and I've just been out of the loop on the issue, but I am puzzled about it.
  5. Some 401(k) plans have many different types of distributions besides lump sum on termination of employment, e.g. hardship, non-hardship in-service after attainment of age 59-1/2, in-service at any age from rollover account, partial distributions after separation from employment, and RMDs. If the plan also has Roth elective deferrals and an in-plan Roth rollover feature, an employee's accounts for elective deferrals, nonelective, matching, and rollover may all contain both Roth and non-Roth accumulations. So when a distribution of less than 100% of any account is made, you have to determine the portion that is Roth, and the portion that is not Roth. The 401(k) LRMs allow a plan to provide that distributions of excess contributions after failure of ADP test are made first from non-Roth amounts, but aside from that, I can find no guidance from IRS regarding what it thinks is permissible and have come to conclusion that it is up to the plan and that the plan can also let the participant decide in his/her distribution request form. E.g., plan document could permit a participant who qualifies for an age 59-1/2 non-hardship in-service distribution, who wants to receive $50k as distribution, and who has $100k of Roth and $100k of non-Roth spread over elective deferral, matching, and nonelective accounts to elect to take the entire $50k from the non-Roth. Also, plan could provide that RMDs always came first from non-Roth until non-Roth exhausted. Anyone else given this some thought or found guidance on the question that I am unaware of? One major vendor has a distribution form that seems to permit what I describe in prior paragraph (i.e., employee choice), but I did not find a supporting provision in its volume submitter.
  6. Two Buy Backs in one year..... yikes. Never experience one, yet two in 3 months.... An employee deferred Roth to a 401k prior to us. He also had pre tax monies. Said employee terminated and rolled Roth dollars to a Roth IRA. Rolled pretax dollars to IRA. $15k in forfeitures at time of distributions. Employee wants to restore his dollars to get the forfeitures back. What are your thoughts on Roth buy-back? Specifically, the Roth start year. I see you can't Roll a Roth IRA to 401k. But we aren't talking about a Rolling back.... The Roth start year starts over when Roth from 401k goes to Roth IRA..... probably why you can't roll Roth IRA to 401k..... And then there is the IRA provider (E-trade). If the Roth can be brought back into the plan. How would you handle the Roth start year situation?
  7. Hello! I am a newbie and just signed on a 401k Roth plan. I still don't understand the basic math behind my personal contributions. a) my employers contribution will be always pre-tax [employers match] b) my personal contribution is after tax when choosing ROTH To make the calculations fairly simple, let's take an example with an annual gross income from 100k. Personal Contribution: 6% Employers Contribution: up to 6% with 100% TRADITIONAL 401k - PRE TAX: When calculating the Traditional, it seems pretty easy. 6% from 100k is $6k. The employer match is 100%, which is another 6k. The 6% is taken from the gross. That makes a total of 12k annual contribution from both parties. 12k will be tax deferred and also invested into the 401k Traditional Funds. ROTH 401 - AFTER TAX: The employers contribution will be handled like the Traditional 401k. It's pre-tax. That means, 6% from the gross of 100k, is 6k. That money will be tax deferred. But how is the employee's contribution handled with the ROTH? 6% contribution.. is that 6% calculated also from the gross of 100k? If that's the case... we would have also 6k that can be invested.. but somehow we have to pay taxes on those 6k before investing, right? Otherwise it wouldn't be after tax? So my questions is: How and when will the 6% for the 401k ROTH be taxed? How is this thing calculated? 100.000 * 6% = $6000 and from the $6000 I'll have to pay taxes? Or is this all wrong.. and do I have to calculate my 6% Roth Contribution after tax... what means.. I can't use the 100k as gross income... instead.. I have to use the 100k for my gross income first, then... minus all the taxes... and then.. what's left over as my net pay... I'll have to multiply it by 6%???? I am totally lost on that... just would like to know how that works! Thank you so much for any little help, appreciate it!
  8. Employer was not updating participants deferral changes they made on the Recordkeeper website. The plan is 3% Safe harbor, so no matching to worry about. So if a plan missed updating a deferral for all of 2016 and 2017, do they to do any corrective remedies? Participant believed they were deferring 8% Roth, but the payroll was only deferring 7%. Basically $15 per pay period difference. Is the link below relevant, or does it not apply because these are Roth contributions? https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections
  9. I have read online that 401K plans can adopt provisions to enable after-tax contributions *beyond* the $18K/$24K limits of contribution into a Roth 401K. Such a provision would enable an employee to contribute the amount to bring the total 401K annual contribution up to $53K/year. Can anyone refer me to pages that describe these plan provisions in more detail?
  10. A plan is adding Roth deferrals as an option mid-year. Should each participant be required to complete an updated deferral agreement?
  11. Payroll was not basing the deferral election percentage on Gross Pay, but rather the Net Pay for the Roth contribution. Taxes were calculated correctly using Gross. Result is the Roth contribution is less than what was elected on the deferral election. Goal for the participant was to have the same contribution amount for pre-tax and Roth. Example: Gross Pay $1,000 Roth Election 4% ($40) Taxable Income $1,000 Fed w/holding (15%) $ 150 Net pay $850 - This was used to determine the Roth Deferral of $34 (short by $6) I'm confident that the result is a "missed deferral opportunity" and can be corrected with EPCRS. Where I'm hazy is what the corrective QNEC contribution should be? It is a 09/30 plan year so the plan year is almost over so there is definitely less than 9 months left in the plan year, so that option is out. So, the only other option is the corrective QNEC. Rev. Proc. 2013-12 states that the corrective QNEC for after-tax contributions is 40% of the missed deferral, 100% of any missed match and of course plus earnings. The relaxed corrections with 2015-28 do not seem to apply to after-tax contributions. Can anyone tell me otherwise and point me in the direction of any guidance that has been issued by the IRS of the appropriate corrective QNEC for after-tax contributions? Thank you!
  12. The plan does not allow in-service withdrawals at any time. The plan does allow in-plan Roth rollovers. The plan also allows distribution from in-plan Roth rollover accounts at any time. The plan would like to change that so the in-service distribution options for the in-plan Roth rollover account are the same as the rest of the plan (withdrawals from rollover accounts are not permitted at any time). Is the distribution from in-Plan Roth rollover accounts a protected benefit? Can it be completely eliminated so that the in-plan Roth distributions are the same as the in-service distributions?
  13. Have a client who lost his job and rolled the balance within a 401(k) (with a Roth provision) into an Roth IRA. He has since found employment and would like to roll the Roth IRA into his new company's 401(k) (that allows rollovers and has the Roth provision). The service provider that is managing the Roth IRA won't allow it and just keeps saying, "it's not allowed because it's a Roth IRA going back to a 401(k)'??? can anyone help? Thanks.
  14. I have a client that has self directed brokerage accounts. The accounts have both Roth and Safe Harbor contributions mixed together in each individual account. We track the Roth earnings separately but it is not as precise as it would be if the contributions were in two brokerage accounts. Is this permitted?
  15. Client has an Employer Sponsored Individual Retirement Account plan - adopted in 1978. The employer withholds the participants' IRA contributions (all are after tax) and the participant's match is also taxed, and makes the deposit to an omnibus IRA trust. Now it's up to each participant to claim the deduction (annually) to convert this contribution to a pretax benefit. What happens, however, when a participant doesn't claim the deduction? Maybe due to the fact that the participant couldn't take the IRA deduction for that year and/or subsequent years? The plan now terminates and the trust holds after-tax IRA money? Where can it be rolled? Is it treated like a ROTH? The Plan doesn't allow ROTH. Any ideas?
  16. I have a client insisting he should be able to do a Roth Safe Harbor and make Safe Harbor POST-TAX contributions. I have explained that his plan is set up as a Roth 401(k) Plan and it has a Safe Harbor feature. He is taking advantage of the Roth Deferrals. I have explained that the government does not allow the employer to do Post Tax contributions. He now wants to see something in writing stating that employers cannot do post tax contributions. Any assistance or direction to the verbiage is greatly appreciated. Thanks
  17. In 2012 I opened a traditional IRA and a Roth IRA account and contributed $5,000 to each. Unfortunately, I made some bad investments and have lost about 75% in both accounts. I would like to deduct as much of these losses for income tax purposes as I can. Specifically, I would like to recharacterize the $5,000 traditional IRA contribution as if it had been contributed to the Roth IRA account. I would then withdraw the entire balance of the Roth IRA account prior to April 15th, 2013, thus avoiding any penalty on excess contributions to the Roth account. Then I would deduct the losses as a misc. itemized deduction, subject to the 2% threshold. Any problems with this? I would also like to make a new $5,000 contribution to the traditional IRA account for 2012, so I can get the above-the-line income tax deduction. Provided this is done after the above-described recharacterization, but prior to April 15, 2013, any problems with this? thanks in advance!
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