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NOTICE 2009-82 has been an important topic since it was released by IRS on September 24, 2009. The notice is dissected in November's IRA Advisor Newsletter, but below are some of the nuts and bolts to remember when working with this ruling.

  • IRS has announced relief that will give some taxpayers the option to roll the unwanted RMDs back to an IRA or plan and wipe out the tax bill.
  • Notice 2009-82 gives eligible taxpayers until November 30, 2009 to roll the unwanted funds back. This can occur even though the 60-day rollover period for a distribution that would have been an RMD already expired.
  • Defined contribution plan participants (401(k)s, 403(b)s, and 457 plans) can roll over any distribution in 2009 that contained funds that would have otherwise been part of an RMD.



Inside IRA

Feature Article

IRS Provides Relief for Unwanted 2010 RMDs

  • IRS Notice 2009-82
  • Who Is Eligible for Relief?
  • No Relief on the One-Rollover-Per-Year Rule for IRAs
  • No Relief for Some Unwanted RMDs
  • Working Around the One Rollover-Per-Year Rule
  • Company Plan Considerations
  • How to Rollover the Funds
  • Reasons to Rollover the RMDs
  • Reasons NOT to Rollover the RMDs
  • Non-Spouse Beneficiaries Get Extra Year to Transfer Funds
  • Advisor Action Plan

Guest IRA Expert
Natalie B. Choate, JD
Nutter McClennen & Fish LLP
Boston, MA

How Executors Can Handle Retirement Assets

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Low Inflation Affects Cost of Living Adjustments in 2010

Taxpayers will not get much of a tax break next year from inflation because there is so little of it right now.

Since the 1980s, many items in the federal tax code have been indexed for inflation each year. More than 50 deductions, exemptions or exclusion amounts are adjusted, plus 40 tax-bracket measures. Indexing helps keep personal income in the same bracket year to year. Without it many people would gradually find themselves taxed at higher rates, reflecting normal wage hikes pushing them into new brackets. The tax law provides for cost-of-living adjustments based on changes in the Consumer Price Index (CPI). The CPI recorded a decline over the last four quarters ending September 30, 2009.

In addition to other adjustements based on COLA, the IRS requires that the Commissioner annually adjust qualified retirement plan dollar limitations on benefits and contributions for cost-of-living increases.

Most of these limits will remain unchanged for 2010.

Here are some notable changes and items that will remain the same in 2010:


Changes will be minimal. Married filers in 2010 will stay in the 15% bracket with income up to $68,000 (compared with $67,900 in 2009), the 25% bracket up to $137,300 (versus $137,050) and the 28% bracket up to the $209,250 (compared to 208,850). Singles will stay in the 15% bracket with income up to $34,000 (versus $33,950).


The amount will stay at $11,400 in 2010 for married filers and at $5,700 for singles. Head of household will see a $50 rise to $8,400.


This will stay at $3,650 in 2010.


The limit for an individual making contributions to IRAs remains at $5,000 plus $1,000 if age 50 or older.

The phase out limit for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return as as qualifying widow(er) remains unchanged at $89,000. For a taxpayer who is NOT an active participant but whose spouse is an active participant, the limit is increased from $166,000 to $167,000.

Private Letter Ruling 200940034:

A taxpayer, we will call him "Ted", wanted to convert his entire IRA balance to a Roth IRA. His financial advisor prepared a distribution request form and mistakenly checked off the box for 35% federal tax withholding, which Ted had not requested.

Ted first became aware of the problem when he received his 1099-R, which showed the 35% federal tax withholding. In addition, Ted's income exceeded the MAGI limit of $100,000 for the year he did the conversion.

Ted decided to recharacterize the net amount of his conversion and the converted funds were returned to an IRA account. The funds withheld for taxes, however, are still at IRS. ONLY THE FUNDS IN THE ROTH IRA CAN BE RECHARACTERIZED.

Several months later, Ted received a refund from the IRS for the federal withholding amount. He attempted to complete a rollover of the refund amount, however the financial institution noted that the rollover was NOT possible because of the expiration of the 60-day rollover period. The financial institution sent Ted a letter admitting that the checking of the box "withhold taxes" and the actual withholding were done in error and without proper notice.

Ted has not used the tax refund amount for any other purpose. He requested that IRS grant a waiver of the 60-day rollover period so he could complete the rollover and put the tax refund amount back into his IRA.

IRS agreed and granted Joe's private letter ruling based on one main fact: The financial institution did not follow Ted's directions and do a conversion on the full IRA account balance.

IRS gave Ted 60 days to roll over the tax refund amount to his IRA.

Q: Can I make IRA contributions in the same year that I was laid off given that I already contributed some money into a 401(k) plan?

A: You can contribute to an IRA in addition to contributing to a 401(k) plan so long as you have earned income. The maximum amount you can contribute in 2009 is $5,000. If you are over age 50 or older by 12/31/2009 you can add an additional $1,000. If your earned income is less than $6,000, you can only contribute up to the amount of your income.

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