Tax Strategy Scan: Avoid the sting of a Roth
How IRA conversions can come at a steep price for clients, plus, ways to dodge a surprise bill from the IRS, in our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
This Roth IRA move can create a massive tax headache: Converting a portion or full balance of an IRA into a Roth can come at a steep price for clients, according to Money. A conversion can include both state and higher federal taxes on Social Security benefits, depending on a client's circumstances. -- Money
These 4 tax bills can surprise, but you can be ready: Debt cancellation, a home sale, gambling winnings and insufficient tax withholdings all can drive up a tax bill, according to USA Today. However, clients who fail to foresee these tax liabilities have options to remedy the situation. Here's how to avoid these from becoming surprises. -- USA Today
Everything you need to know about RMDs: If your client is baffled by RMDs, they could be risking a big tax penalty, so it's worth it for them to take a moment to review the basic rules, according to Kiplinger. What’s scary is that the stakes are high: If the client takes an IRA distribution for a calendar year that’s less than what the IRS requires, they’ll be hit with a tax penalty of 50 percent of the shortfall. Now, the IRS may waive the penalty, for a “reasonable cause." -- Kiplinger
Read this to see if your client owes the AMT: Thanks to inflation, more taxpayers are having to pay the AMT, according to MarketWatch. While the “regular” tax brackets, exemptions and standard deductions were adjusted annually for inflation, the AMT brackets and exemptions weren't until recently. So taxpayers whose income increased entered the dreaded AMT zone. -- MarketWatch