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January 2013 Click here to view previous issues Volume 6 Number 1

 In This Update:
  • Q of the Month:
    Did the Income Limits Change on Roth IRA Conversions?
     
  • Key Focus:
    QCDs are Now Available
     
  • 2013 IRA and Tax Tables

 Resources

 Expert
Professional
Assistance


 
 
 

?? Question of the Month: Did the Income Limits Change on Roth IRA Conversions?

Q: Did the income limits on Roth IRA conversions expire with the Bush tax cuts at the end of the year?

A: There are no income limits to do a conversion to a Roth IRA. The prior income limit of $100,000 was permanently repealed beginning in 2010. Therefore, there is no income limit for a Roth IRA conversion in 2013. You may be getting Roth IRA conversions confused with Roth IRA contributions. There are income limits for Roth IRA contributions in 2013. CLICK HERE to view these limits.


CLICK HERE to view other questions and answers from The Slott Report Mailbag.



NEW TAX LAW PROVIDES ENDLESS OPPORTUNITIES

EVERYTHING YOU NEED TO KNOW ABOUT NEW TAX LAW! REGISTER TODAY



Top IRA Rulings of 2012

2013 entered with a bang, at least from a tax law standpoint. The new tax law arrived on New Year’s Day, 2013, just as the newsletter went to print for January. We will have in-depth coverage of the American Taxpayer Relief Act of 2012 in future issues.

The January issue of Ed Slott's IRA Advisor Newsletter looks back at the many developments that occurred during 2012 that related to IRAs and retirement plans.

This issue breaks down the top court decisions, IRS rulings and private letter rulings that changed the landscape or made existing tax law even clearer.

READ ALL ABOUT THIS IN JANUARY'S ISSUE OF ED SLOTT'S IRA ADVISOR NEWSLETTER


Inside Ed Slott's IRA Advisor Newsletter

Top IRA Rulings of 2012

  • Court Decisions
  • - Inherited IRA Mistake
  • - Executor and Trustee Personal Liability
  • - $300,000 Mistake! - Plan Beneficiary Form Not Updated
  • - 10% Penalty Cases
  • - Bankruptcy Protection for Inherited IRAs
  • - IRA Cannot be an S Corp. Shareholder
  • IRS Rulings
  • - IRS Hurricane Sandy Relief
  • - Qualified Longevity Annuity Contracts
  • - 3.8% Net Investment Income Tax Proposed Regs
  • - Alternative Valuation is Available for IRAs
  • Private Letter Rulings
  • - Removing the Estate as IRA Beneficiary
  • - Removing a Trust as IRA Beneficiary
  • - Stretch IRA Permitted with QTIP Trust as Beneficiary
  • - IRA Disclaimer Permitted After Withdrawals by Beneficiary

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January Key Focus

QCDs for 2012? Yes, They Are Now Available

Congress finally got around to passing tax legislation for 2012 with the American Taxpayer Relief Act of 2012. It revived qualified charitable distributions (QCDs) for two years - retroactively for 2012 and also for 2013. They had to tweak the rules, though, for 2012 since they did not renew the provision until 2013.

What major tweak is in store? You only have until January 31, 2013 to do a QCD transaction for 2012. Here are the special rules.

The extension of the QCD provision is effective for transactions that occurred after December 31, 2011. If you took a chance on Congress extending the provision and did a qualifying QCD at any time in 2012 (as we suggested as a possible strategy several times), your move paid off. You now have a valid QCD transaction.

If you waited for Congress, but ended up taking your 2012 required minimum distribution (RMD) in December to avoid the 50% penalty on a missed RMD, all is not lost. One of the "special rules" allows a distribution made to an IRA owner in December to be treated as a QCD when all or part of the distribution is transferred "in cash" to a qualifying charity in January, 2013.

Another special rule says that a QCD distribution done in January, 2013 "shall be deemed to have been made on December 31, 2012." This makes it sound as though you cannot do a QCD in January for 2013.

The section of the law regarding the special rules says that these transactions can be done "at such time and in such manner as prescribed by the Secretary of the Treasury." This means that IRS should be providing us with some guidance on these rules. Since the rules are only in effect for the month of January, hopefully this guidance will be issued quickly.

The Slott Report (www.theslottreport.com) is your go-to source for all information and analysis of The American Taxpayer Relief Act of 2012.

CLICK HERE to read our instant analysis of the new tax law and watch a brief video outlining 5 key planning points.



2013 IRA and Tax Tables

IRA contribution limits and tax thresholds are always being tweaked by Congress and 2013 is no different. IRS recently unveiled many important limits and thresholds as it relates to retirement planning, several of which we discuss below.

In 2013, the Traditional IRA contribution limit sits at $5,500 (a $500 increase over last year's level) for individuals under the age of 50 and $6,500 (also a $500 upgrade) for those age 50 or older. This is great news, as it provides individuals with IRAs $500 more to put into their retirement account in 2013. So make sure to budget it in and contribute the maximum, if you can afford it.

The Roth IRA contribution eligibility also changed for 2013. If you are married filing jointly, your Roth IRA contribution begins to phase out at $178,000 and completely phases out at $188,000. If you are filing single, the income limits begin at $112,000 and your ability to contribute completely phases out at $127,000.

Remember, even if you exceed these Roth IRA contribution income limits, you can still convert Traditional IRA funds or employer plan money (if the plan allows) to a Roth IRA. There are NO income restrictions on a Roth IRA conversion.

This is just the tip of the iceberg. Our updated IRA and tax tables page at www.IRAhelp.com also includes all IRA deduction thresholds, the latest on estate, gift and GST exemptions and provides all the IRA minimum distribution tables.

Make sure to bookmark the page as we update it continuously when changes warrant, and stay tuned for the federal income tax brackets, which should be on their way any time now.