Bunch of humble bragging ITT

3/9/2017 10:41:38 AM

yeah, sorry about that. i even felt like a douche writing it but Quicksilver seems to know enough to answer that lingering question, so i figured why not.

since no one reads the last post:

Quote :

" Quote : "I just did my taxes this weekend and as I'm inputting my W-2s, I quickly realize that I didn't even think about Roth income limits and I'm going to end up being totally ineligible " So this happened to me this year. i've never reported my roth on taxes because i've never thought it was required, especially since i never get a 10xx form for it or anything. my wife's new job doesn't have a 401k, so i entered in her IRA information, which is when I also saw that our roth was ineligible for the 2016 year, and it appears it was the previous year as well. Do I need to correct this? How will the system know to work itself out when I retired in 30+ years? Also, same applies for the IRA. That was ineligible for deduction status as well, so how will the system know in 30 years not to charge tax on that portion of the contribution?"

3/9/2017 2:55:10 PM

i realized that too as I'm writing it. But most people don't know me in real life here and plenty TWWers make more than I do so I don't really know who I'd be bragging to haha

3/9/2017 3:23:02 PM

congratulations on your successful careers, braggots

3/9/2017 4:38:32 PM

Quote :

"Has anyone else here over-contributed due to a salary increase pushing them into the phase-out or totally ineligible bracket in a given year?"

You have two options:
1. Recharacterize the contributions and estimated earnings to a traditional IRA (non deductible) - then do IRA conversion to Roth (Back Door IRA - links below)
2. Pull out the contributions and earnings on the contribution and pay tax on the earnings plus early withdrawal penalty on the earnings.

Your brokerage firm should be able to provide you with further advice on this. Any changes for 2016 need to be done prior to April 18, 2017 to avoid a 6% penalty.

Backdoor IRA Info:
https://personal.vanguard.com/us/insights/video/2505-Exc2
https://www.nerdwallet.com/blog/investing/backdoor-roth-ira-high-income-how-to-guide/
http://news.morningstar.com/articlenet/article.aspx?id=687449

3/9/2017 7:34:19 PM

Quote :

"So this happened to me this year. i've never reported my roth on taxes because i've never thought it was required, especially since i never get a 10xx form for it or anything. my wife's new job doesn't have a 401k, so i entered in her IRA information, which is when I also saw that our roth was ineligible for the 2016 year, and it appears it was the previous year as well. Do I need to correct this? How will the system know to work itself out when I retired in 30+ years? Also, same applies for the IRA. That was ineligible for deduction status as well, so how will the system know in 30 years not to charge tax on that portion of the contribution?"

I am no accountant, buuuut:

I believe you will continue to accrue penalties on your roth contributions for EVERY year until you remove your contributions and any gains on those contributions. Even if you didn't report it to the IRS, your brokerage almost assuredly did.

Moral of the story, you should pull it out and recharacterize it into a traditional IRA is my advice

3/9/2017 9:35:04 PM

^^ & ^

3/9/2017 10:29:53 PM

^^

but the IRS says that we don't need to report Roth IRA contributions on the tax returns:

Quote :

"Roth IRAs A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), "

https://www.irs.gov/taxtopics/tc451.html

I think that is what get's me so confused. How is it tracked if the IRS says you're not supposed to report it?

3/10/2017 11:58:14 AM

I always thought the IRS did not care about what goes in and out of a ROTH (except for the gains). The money that goes in is not tax-deferred.

3/10/2017 10:34:45 PM

You don't report it to the IRS but your broker does on form 5498. That said I have never seen the IRS come at someone for overcontribution in a Roth so I am uncertain of their monitoring. All of the ones I have corrected were caught by client and/or CPA. If I were you I would be to get it corrected. IRS audits run several years behind so just because they haven't busted you yet doesnt mean that letter isnt coming. I'm not a CPA so i could be totally wrong about audit and Im sure people get away with it. Im uncertain of the risk of letting it slide so would err on the side of caution.

[Edited on March 11, 2017 at 7:16 AM. Reason : .]

3/11/2017 7:11:09 AM

Thanks. I wish it were reported because then it'd be much easier to prevent stuff like this :-/

However, it's not a mistake that I'll make again. I appreciate all the advice.

3/11/2017 12:50:51 PM

Got behind with work and other shit. Called vanguard today and took care of this finally though. Thanks for the help.

3/22/2017 1:20:32 PM

^How hard was it?

3/22/2017 8:17:04 PM

1 day to xfer it to the new ira and another day to xfer it back
Had to sign on to approve the opening of the new ira while I was on the phone

3/22/2017 8:44:54 PM

yeah it was easy. i was not even on the phone very long. Vanguard was super helpful. But it helped doing my own reading and asking in this thread beforehand still, so that I understood the gist of what was going on already.

[Edited on March 24, 2017 at 12:56 PM. Reason : ]

3/24/2017 12:56:00 PM

My wife just got a promotion that gives us a little wiggle room in our budget.

We currently have about two months salary worth of emergency savings. We are currently maxing out a Roth for each one of us and I already have a (supposedly guaranteed)retirement plan through through the state.

We are starting to look at moving out of our current neighborhood. What should we do with our leftover money? Overpay on our current mortgage? Save in savings account? Open some sort of taxed investment?

[Edited on April 3, 2017 at 10:13 AM. Reason : .]

4/3/2017 10:11:19 AM

Quote :

"We are starting to look at moving out of our current neighborhood. What should we do with our leftover money? Overpay on our current mortgage? Save in savings account? Open some sort of taxed investment? "

Save it for a down payment on your next house. Keep your current house and rent it out.

4/3/2017 12:09:05 PM

I've thought about that but I would be worried about the renters messing it up.

4/3/2017 12:47:05 PM

That's what insurance and security deposits are for.

4/3/2017 6:24:56 PM

Been doing some reading on IRA's, and apparently I'm not available to take a deduction on my traditional IRA. I just learned that Im supposed to be filing form 8606 with my IRA to track my cost basis my entire life for tax purposes, as the IRA company typically does not do this.

Luckily, my Tax Act filing has been doing this form for me, but it still seems like a major pain in the ass.

My question: Is anyone else in this boat, and was anyone else aware they were supposed to be filing form 8606 if you are unable to take a deduction for traditional IRA contributions?

4/3/2017 7:19:35 PM

Are you not eligible for a roth ira as well?

4/4/2017 1:47:46 AM

No

4/4/2017 9:21:54 AM

So then why not put it in a roth...

4/4/2017 5:23:02 PM

For clarification, I am not eligible for a roth, and I am not eligible for a tax deduction in a traditional IRA. I am completely over the phase out limits for a tax deduction


I guess I need to learn more about the backdoor roth conversion.



[Edited on April 4, 2017 at 6:31 PM. Reason : ]

4/4/2017 6:26:35 PM

Quote :

"I've thought about that but I would be worried about the renters messing it up."

http://www.biggerpockets.com

I have talked to many many people who invest in residential real estate and the bottom line is the kind of house you have is the kind of tenant you are going to have. I went to an eviction class taught by a slumlord from the triad and he said he goes around every WEEK and collects the rent most of his tenants pay in cash. I have also taken a class taught by a guy with over 70 single family homes and townhomes in and around Wake County and he said he never buys a house he would not live in himself. He said he rarely has any problems with his tenants the only one he put with a property manager is the house next door from him he just bought for his parents when they get old. He did not want to be a landlord and neighbor at the same time.

You can use http://www.cozy.co to collect rent online as well.

4/4/2017 9:27:41 PM

Quote :

"I guess I need to learn more about the backdoor roth conversion."

yep yep

4/5/2017 1:22:01 AM

bttt.

2018 contribution completed.

1/3/2018 9:15:50 AM

due to the tax changes i think it's good to get your contribution in as early as possible this year - large cap looks to be poised to do well

1/3/2018 2:47:50 PM

The tax laws were written to expire 8-10 years from now I believe. The only way this has a chance to be thrown out one minute before January 2021 is for the left to have 2/3 of BOTH the senate and house. I personally like to wait until the income is realized before ROTH investing in case you get laid off, disabled, etc. etc. that would cause you to have contributed with no income to back it up, i.e. a cluster come tax time. I guess if you are married and she works the odds of something bad happening to both of you is so low that it's probably not a big deal to fund Jan 2.

Also, large caps, mid caps, and small caps are poised "on average" to do well when I check the 1871-2017 chart of domestic equities. Total US Index on auto DRIP it is for me, as usual, year over year, very boring.

1/3/2018 3:23:21 PM

BTTT. I may now be a part of the group that over contributed

12/21/2018 3:31:53 PM

I am all for DCA and getting in early. But its a pain in my ass when ppl do it in a roth and I have to calculate the earnings on 12 overpayments. Do yourself and/or your advisor a favor and make one contribution when you can afford to do so and know how much you can drop in. I as a rule try to keep my clients from DCA in a Roth. Traditional.. fire away and know the limits.

Oh, and backdoor contributions are still wide open on Roth. Great option for those who cant get to it through companies who are offering it in group plans. Did several this year for hnw clients. Every little bit helps.

[Edited on December 22, 2018 at 9:17 AM. Reason : Backdoor]

12/22/2018 9:10:15 AM

My shit has lost value.

12/25/2018 10:26:55 PM

unless you plan on retiring in the next couple years it doesn't matter, just don't even look at your balances when the market is down

12/26/2018 8:47:32 AM

Quote :

" But its a pain in my ass when ppl do it in a roth and I have to calculate the earnings on 12 overpayments."

That's hilarious. Are we dealing with people that run their own business and have an unexpected windfall in December or something with profits? I'd tell them just to make 2018 contributions in 2019 before tax day and work on a year delay with 20/20 vision as to what they should do if they are at the level of sophistication you describe.

12/26/2018 3:34:19 PM

Hit the nail on the head. It’s usually people who transfer in and end up making more than they thought but my assistant failed to tell them noo, you shouldnt do that. I’ve learned to make this a training point for new hires. Calculatiing the overpayment is simple arithmetic but calculating the excess earnings is a bitch. So yes, your statement is my suggestion to all folks. One payment when you do your taxes or your CPA gives you the nod. I also hate millionnaire business owners who use turbo tax and not a CPA. Cheap bastards always wnd up calling me 10 times with questions on their taxes and still fuck it up get audited and i have to help fix it because Im full service.

[Edited on December 27, 2018 at 2:16 AM. Reason : .]

12/27/2018 2:10:37 AM