Resources  Expert Professional

for These Important October Dates

October is full of important dates for financial advisors who need to stay on top of their clients' IRA accounts. Keep this list nearby and mark your calendars with these need-to-know deadlines.

1: Last day to establish a SIMPLE plan for 2009

15: Last day to file 2008 taxes

15: Last day to recharacterize 2008 Roth conversions

15: Last day to recharacterize 2008 contributions or to withdraw unwanted 2008 contributions

15: Last day to withdraw prior year excess contributions and avoid the 6% penalty for 2008

31: Last day to provide documentation to custodians or plans for trust beneficiaries who inherited in 2008


Inside IRA Advisor

Feature Article

Tax Court Denies the
Disability Exception

  • 10% Penalty is Assessed on a $158,310 Early Distribution!
  • Disability Exception from the 10% Penalty
  • Facts of the Case
  • There is NO Financial Hardship Exception
  • The Court's Ruling
  • Similar Cases, But the Same Result
  • IRS Guidance - CCA 200922041 Released by IRS May 29, 2009
  • Advisor Action Plan

No NUA Treatment for
Shares of Employer Stock
Converted to a Roth IRA

IRS Releases Notice

Guest IRA Expert
Mark Fried
TFG Wealth Management
Newtown, PA

IRA Planning For Blended
The Brady Bunch Effect

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To Convert or Not to Convert - That is The Question

We have been discussing the importance of 2010 Roth Conversion Planning for some time. Ed Slott will cover NEW 2010 Roth Conversion Planning during our 2-Day IRA Workshop, Instant IRA Success, on November 5 - 6 at the Biltmore Resort and Spa in Phoenix, AZ.

It is important to know the basic reasons why individuals should consider or NOT consider Roth conversions.

Reasons to Consider Conversions:

  • If your client's income tax bracket may be the same or higher in retirement.
  • If your client has the ability to report lower income in any given year, converting in that year could lower his or her income tax on the conversion.
  • If your client does not need the IRA funds to live on and can take advantage of the suspension of the minimum distribution rules for 2009.
  • If your client has the ability to make contributions even after age 70 1/2 (if there is eligible earned compensation).
  • If your client's beneficiaries receive an income-tax-free inheritance.

Reasons NOT to Consider Conversions:

  • If your client will have an immediate need for the money.
  • If your client expects to have a lower tax bracket in retirement.
  • If your client has an aversion to paying the income tax up front and does not trust the government to keep the tax-free deal.
  • If your client does not have the liquidity to pay the tax on the conversion from non-retirement assets.
  • If your client has named a charity, which is exempt from income tax, as the beneficiary of the IRA. No income tax will be due at the death of the client.


RMDs were waived for 2009, but the relief came late in 2008 causing some people to take withdrawals that were not required. IRS Notice 2009-82 provides retroactive relief for IRA owners and spouse beneficiaries by allowing them to rollover (put back) 2009 RMDs received earlier this year.

IRS is waiving the 60-day rollover deadline to permit any IRA owner, plan participant, or their spouse beneficiary to undo the 2009 RMD, regardless of when in 2009 they took the unwanted RMD.

The deadline has been extended to November 30, 2009 or 60 days from the date the funds were received, whichever is later. This means your client who received an RMD (which was not required) in January or March, for example, now has the option of rolling those funds back into a tax-deferred account.

This relief does NOT apply to non-spouse beneficaries who are prohibited by the tax code from ever doing a rollover.

CAUTION: The one rollover per year rule is still in effect.

Explanations of the rules that govern IRAs are usually provided in Ed Slott's IRA Advisor Newsletter.

Q: How is Schedule C income treated relative to the Roth conversion? I think I heard that it can somehow not be included?

A: Schedule C of your personal income tax return is self-employed income. That income or loss will be part of your modified adjusted gross income (MAGI). It cannot be ignored. In 2009, if your MAGI exceeds $100,000, and if you are married and filing separately, you will not qualify for a Roth IRA conversion. In 2010, both of these restrictions will be permanently eliminated.

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