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 In This Update:
  • Q of the Month:
    Can I Delay Roth Conversion Tax Payment?
  • Key Focus:
    2012 Tax Code Changes
  • Ruling to Remember:
    Taking IRA Advice From a Loan Officer

 Resources  Expert


?? Question of the Month: Do I only have to use the 5-year rule once?

Q: I made a partial conversion of $400,000 from my traditional IRA to a Roth IRA in 2010. I wanted to take advantage of the 2-year tax deal, and I had the money available at that time. However, I have since lost my job, and I will need the money set aside for taxes to stay afloat. I know the recharacterization period has expired, so is there any way to reverse the Roth, delay the payment, or set up a payment plan?

A: You cannot recharacterize later than October 15 of the year following the conversion. Since that date has passed, you can request a private letter ruling (PLR) asking for an extension. However, PLRs are generally granted only if the individual was not eligible for a Roth conversion or if there was an error by the advisor or the IRA custodian. Also, the IRS cost to apply for a PLR is $4,000, plus the cost to pay someone to prepare the request. If you cannot afford to pay the tax from other income sources, you can always pay the tax with money from the Roth. There would be no income tax on the withdrawal. If, however, you are under age 59 1/2, you would be subject to a 10% penalty on the amount withdrawn.





Proposed IRA Tax Rules on QLACs, Romney’s IRA

The March issue of Ed Slott's IRA Advisor Newsletter discusses the new proposed regulations to create qualified longevity annuity contracts. These new rules will allow retirement account owners to purchase certain annuity contracts with a portion of their retirement assets that can be excluded from their required minimum distribution (RMD) calculations.

Also in the March issue: Guest IRA Expert Joe Clark discusses a hot topic in the IRA world, Republication Presidential candidate Mitt Romney’s eight-(or nine?) figure IRA. The article goes through the accumulation phase, planning strategies and key points to consider.


Inside Ed Slott's IRA Advisor Newsletter

QLACs - Proposed IRA Tax Rules on Qualified Longevity Annuity Contracts

  • IRS Releases New Proposed Regulations to Create Qualified Longevity Annuity Contracts - REG- 115809-11, Released February 3, 2012
  • Longevity Annuities and RMDs... What’s the Problem?
  • How QLACs Would Work
  • Limits on QLAC Purchases
  • Disadvantages of QLACs
  • Death Benefit Options for QLACs
  • QLAC Options for Non-Spouse Beneficiaries

Guest IRA Expert
Joe Clark, CFP, RFC
Financial Enhancement Group
Anderson, Indiana

Mitt Romney’s Eight-(or Nine?) Figure IRA

2012 Retirement Plan Contribution Limits Chart

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March Key Focus

2012 Tax Code Changes

Numerous tax changes are in store for individuals in 2012. It’s very difficult, however, to write with any degree of certainty about those affecting your income because Congress has shown a tendency to make retroactive changes at any point in time.

A number of income tax provisions that affected individual taxpayers expired at the end of 2011. Some examples of these include:

  • the option for individuals to deduct state and local sales taxes instead of state and local income taxes on their federal return
  • certain deductions for higher education expenses
  • an allowance for school teachers to deduct up to $250 annually in out-of-pocket classroom expenses

The end of 2011 also closed the curtain on U.S. savings bonds available in paper form. Savings bonds, which dated back to 1935, now will be available in electronic form only. While savings bonds are no longer available for hardcopy purchase, many banks and credit unions will continue to redeem them upon request.

Another provision that expired on December 31, 2011 and was near and dear to our hearts was the “Qualified Charitable Distribution” (QCD), which allowed seniors age 70 1/2 and older to transfer up to $100,000 annually (including their required minimum distribution for the year) from their IRAs to qualifying charities without having to report the distributions as taxable income.

If you have made one or more QCDs before, or were thinking about doing so in the future, you might want to hold off on taking any distributions from your IRA early in 2012. This provision has been reinstated twice after the start of a new tax year, and if for some reason it is instituted again this year, you will be able to use it and pay no income tax on the amount going to charity. However, once payments have been made from your IRA to you, they are not eligible to be used for a QCD. A QCD would have to be made using other funds in your IRA, which generally would be less efficient for you.

Visit The Slott Report ( for daily IRA, tax and retirement planning information, search our extensive 600-plus article library, bookmark the site and subscribe to our email news feed.

Ruling to Remember

Private Letter Ruling 201209023

“David,” a 45-year-old taxpayer, had an IRA with his financial institution. He received a distribution from that IRA that he planned to rollover before any possible tax consequences.

Before the distribution took place, David talked to a loan officer at his financial institution and was advised that he had more than 60 days to put the money into an IRA without tax issues. He deposited the distribution into a non-IRA account at the financial institution with the intention of rolling over those funds into an IRA.

Relying on the loan officer’s advice, David attempted to complete the rollover on a date that was before the loan officer’s requested date, but more than 60 days after receiving the distribution. That was a major error.

David quickly discovered the error of his ways and requested a PLR for an extension of the 60-day rollover rule. IRS granted the extension on the basis of David’s assertion that his failure to accomplish a timely rollover was due to incorrect advice from the financial institution. He was granted another 60 days from the issuance of the letter ruling to contribute the desired amount to an IRA.

A loan officer is not the best source of IRA advice. If you are going to ask for guidance and follow it to a tee, make sure you inquire with someone knowledgeable in this specialized area.

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