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March 2013 Click here to view previous issues Volume 6 Number 3

 In This Update:
  • Q of the Month:
    If I Disclaim an Inherited IRA, Do I Tell IRS?
  • Key Focus:
    Reducing Your 2012 Tax Liability in 2013
  • Ruling to Remember:
    Pay Attention to the 60-Day Rollover Window




?? Question of the Month: If I Disclaim an Inherited IRA, Do I Have to Tell The IRS?

Q: If you disclaim/refuse an IRA inheritance/inherited IRA, is that information reported to the IRS or is it only reported if/when you accept the inheritance and pay tax on it?

A: A qualified disclaimer of an IRA is not reported to the IRS. The disclaimer is filed with the financial institution that has the IRA. If you as beneficiary do not take a required minimum distribution from the IRA and you disclaim your entire portion, you will not receive IRS Form 1099-R.

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



Updating Existing Planning Strategies Post-ATRA

The new tax law has brought about planning strategies that advisors and their clients should revisit in 2013.

The American Taxpayer Relief Act (ATRA) was signed into law on January 2, 2013. It brought changes to many areas of the tax law, including ordinary income tax, capital gains tax and estate, gift and generation skipping transfer (GST) taxes.

The March issue of Ed Slott's IRA Advisor Newsletter goes through the planning strategies that advisors should revisit with clients to see if they have been impacted by the changes made by ATRA, and if so, whether those changes make such a strategy more or less favorable.


Inside Ed Slott's IRA Advisor Newsletter

Updating Existing Planning Strategies Post-ATRA

A Fresh Look at NUA, Roth Conversions and Transfer-Tax Planning

  • An Updated Look at Net Unrealized Appreciation (NUA)
  • A Fresh Look at Roth Conversions
  • Planning Strategies Using the Current Estate, Gift and GST Tax Rules


Check out the brand new 2013 charts on pages 6 & 7!

2013 Tax Provisions in the American Taxpayer Relief Act of 2012 (ATRA) Chart

2013 Tax Provisions in the New Health Care Laws Chart

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March Key Focus

How to Reduce Your 2012 Tax 2013!

There isn't much you can do now to lower your tax liability for 2012. One possible way, however, can not only help you save money on your 2012 taxes, but can also help you plan for retirement. We are talking about a deductible IRA contribution. 2012 IRA contributions can be made up until April 15, 2013 and, if you meet certain criteria, you can take a deduction for that contribution, thus reducing your 2012 tax liability.

If you havenít made an IRA contribution for 2012 and are wondering if you can make a deductible IRA contribution now to help reduce your 2012 tax bill, follow the questions below to find your answer.

1) Did you have "compensation?" (Compensation includes certain types of income, such as wages, self-employment income and taxable alimony. It does NOT include interest, dividends, capital gains or other passive income.)

If no, you CANNOT make a deductible IRA contribution for 2012. In fact, you can't make any traditional IRA or Roth IRA contribution at all.

If yes, move to the next question.

2) Were you born after June 30, 1942?

If no, you CANNOT make a deductible IRA contribution for 2012. You also cannot make a nondeductible contribution to a traditional IRA.

If yes, move to the next question.

3) Were either you or your spouse an "active participant" in a company-sponsored retirement plan for 2012? (The definition of active participation varies depending on the type of plan. For 401(k) and similar plans, there is active participation if any salary deferrals or employer contributions were made during 2012.)

If no, here's some good news for you. You CAN make a deductible IRA contribution for 2012. Note that if neither you nor your spouse were an active participant in a company plan, there is no income limit preventing you from taking a deduction for your IRA contribution.

If yes, CLICK HERE to read the rest of this article at The Slott Report.

Ruling to Remember

Private Letter Ruling 201306031

This was a case of remodeling gone wrong, but the issue wasn't the granite or cabinets, but the way a taxpayer we will call "Julia" set up a large financial reserve for the project.

"Julia" was remodeling her home and withdrew funds from her IRA in anticipation of additional costs for the project. When she realized she wouldn't need the extra funds and wanted to return them to her IRA, the 60-day rollover period had passed.

She filed a private letter ruling request asking IRS to waive the 60-day rollover requirement, yet she didn't have any evidence to support a waiver. "Julia" didnít describe a valid reason for missing the rollover period other than not knowing about it.

IRS declined to waive the 60-day rollover requirement with respect to "Julia's" distribution, meaning she couldnít put the funds back into her IRA.

Lesson to Learn:
Know the rules or work with an educated financial advisor who does and reminds you of important dates like the 60-day rollover window. You don't want to end up like "Julia" in this case.