Search found 13936 matches

by Spirit Rider
Thu Feb 04, 2021 4:24 pm
Forum: Personal Investments
Topic: Best way to consolidating accounts from prior employers (403b, 457b, 401a, roth, rollover)
Replies: 8
Views: 851

Re: Best way to consolidating accounts from prior employers (403b, 457b, 401a, roth, rollover)

Some things to think about. Only the 401a plans are guaranteed to be ERISA Title I qualified for full anti-alienation asset protection. Most 403b plans are not ERISA plans. No 457b plans are ERISA plans. 401a/401k/403b in-service rollovers are allowed no later than age 59 1/2. 457b in-service rollovers are allowed no earlier than age 59 1/2. Only 457b contributions and earnings can be distributed after separation without being subject to the 10% early withdrawal penalty. Rollovers from any other source are tracked and will be subject to the 10% early withdrawal penalty on distribution. If the 401a has comparable investment options/costs as the 403b or 457b. That would be my choice for a rollover destination, provided the a plan accepts roll...
by Spirit Rider
Thu Feb 04, 2021 1:41 pm
Forum: Personal Finance (Not Investing)
Topic: Fixing Excess HSA Contribution
Replies: 25
Views: 3829

Re: Fixing Excess HSA Contribution

Yes, the steps are:
  • Do nothing with the HSA/custodian. This is purely between you and the IRS. The excess contribution and earnings remain in the plan.
  • If the excess contribution was by salary reduction, report it for 2020 as other income.
  • File a 2020 Form 5329 reporting the 2020 excess $15 HSA contribution and paying the 6% excise tax.
  • Contribute less than your maximum 2021 HSA contribution by the excess contribution.
  • File a 2021 Form 5329 reconciling the excess contribution balance with available HSA contribution space.
That's it.
by Spirit Rider
Thu Feb 04, 2021 11:42 am
Forum: Personal Consumer Issues
Topic: Using an unlicensed painting contractor? (California)
Replies: 49
Views: 3848

Re: Using an unlicensed painting contractor? (California)

gwe67 wrote: Thu Feb 04, 2021 10:19 am The state determined that licensure is important enough in this profession that they regulate it. What makes you qualified to determine that the state is incorrect?
Some licensing requirements in many states are driven by the relevant Cabal/Cartel to limit supply and artificially inflate prices.

Obviously, there are many professions where licensing is necessary to protect the public. However, there are also many fields where the trade association's lobbyists obfuscated and bribed (with campaign contributions) to get ridiculous licensing requirements.
by Spirit Rider
Wed Feb 03, 2021 9:37 pm
Forum: Personal Finance (Not Investing)
Topic: CPA woes - SEP-IRA to SIMPLE IRA
Replies: 9
Views: 839

Re: CPA woes - SEP-IRA to SIMPLE IRA

A one-participant 401k allows an up to 100% of compensation employee deferral not to exceed the employee deferral limit (2020 = $19.5K) across all 401k, 403b and SIMPLE IRA plans. It also allows the same employer contribution up to 25% of compensation as a SEP IRA. Combined they can not exceed the lessor of your compensation or statutory limit (2020 = $57K). However even though starting for 2020, you now have until your tax filing deadline including extensions to adopt and contribute to a one-participant 401k. You would have needed to have your adoption agreement accepted and an employee deferral election completed by 12/31. Since that has not happened, there is no benefit to try to unwind your 2020 SEP IRA contribution in order to be able ...
by Spirit Rider
Tue Feb 02, 2021 6:37 pm
Forum: Personal Investments
Topic: Amount of earned income counted towards Roth IRA
Replies: 22
Views: 1992

Re: Amount of earned income counted towards Roth IRA

Maybe, the OP is only working one pay period this year.
by Spirit Rider
Tue Feb 02, 2021 6:13 pm
Forum: Personal Investments
Topic: Amount of earned income counted towards Roth IRA
Replies: 22
Views: 1992

Re: Amount of earned income counted towards Roth IRA

See IRS Publication 590-A What is Compensation?

It is yearly W-2 (Box 1 Wages - Box 11) + (business profit - 1/2 SE tax - self-employed pre-tax deferrals and employer contributions).

Note: W-2 wages are reduced by pre-tax employee deferrals, HSA contributions by salary reduction and other Section 125 Cafeteria plan pre-tax salary reductions.
by Spirit Rider
Tue Feb 02, 2021 5:44 pm
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

Under what basis would an in-service rollover from the Vanguard Individual 401k be allowed with no distributable assets?
by Spirit Rider
Tue Feb 02, 2021 4:43 pm
Forum: Personal Finance (Not Investing)
Topic: HSA: Received 1099SA from old HSA provider
Replies: 9
Views: 867

Re: HSA: Received 1099SA from old HSA provider

It is extremely rare for a properly executed and reported HSA 60-day HSA rollover to result in any communication from the IRS.

Technically, it usually is in the form of a CP 2000 Notice. Unfortunately to the uninitiated, in the IRS' warm and fuzzy nature this Notice takes the form of; "you are guilty until proven innocent."
by Spirit Rider
Tue Feb 02, 2021 4:22 pm
Forum: Investing - Theory, News & General
Topic: 401K Contributions. Why a percentage?
Replies: 29
Views: 2660

Re: 401K Contributions. Why a percentage?

Using deferral election percentages has nothing to do with ADP testing. The ADP percentages are calculated from end of the year totals for deferrals and compensation. Other than the total deferrals, the elections during the year are irrelevant.
by Spirit Rider
Tue Feb 02, 2021 4:15 pm
Forum: Personal Investments
Topic: 529 Transfer
Replies: 2
Views: 438

Re: 529 Transfer

Anyone can do one rollover per twelve (12) month period between 529 plans.

You will have to check with the new state, but it would be very unlikely that a rollover qualifies for a deduction. However, it is very common if you have received deductions for the contributions to the current 529. For that state to "recapture" those deductions by making you pay them back.
by Spirit Rider
Tue Feb 02, 2021 4:03 pm
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

cowdogman wrote: Tue Feb 02, 2021 3:52 pm Sounds like you will be trying to "amend Schwab to Vanguard". I'm still unsure how that would work to merge two existing plans, but if it does, great.
The OP would not be trying to merge two existing plans, but rather amending the original Vanguard Adoption Agreement to amend the Schwab plan rather than adopting a new plan. I see no reason why this wouldn't be allowed and would be considered a timely self-correction not requiring any reporting to the IRS.

Anecdotally, I know this has been used on several occasions to solve this very problem. I just don't remember if it was done at Vanguard.
by Spirit Rider
Tue Feb 02, 2021 3:52 pm
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

I think so, too. So just to be clear, I will: 1. Ask Vanguard to change the original adoption agreement to "amendment." (I hope they wouldn't refuse to do that!) 2. Liquidate all my assets at Schwab. (I'll have to take a loss on some positions. But it's better than having to deal with the IRS.) 3. Transfer cash to Vanguard. Is there anything missing from these steps? Thanks. You have the steps correct. I don't know why they wouldn't allow it within the same plan year. You are simply correcting an innocent mistake of adopting a new plan instead of amending an existing one (that is your story and you are sticking to it). They only thing you can do is ask. Just be aware it may take more than one try. Vanguard, Fidelity, TD Ameritrad...
by Spirit Rider
Tue Feb 02, 2021 3:40 pm
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

kliu888 wrote: Tue Feb 02, 2021 12:25 pm On 2nd thought, can I amend Schwab to Vanguard, then just roll Schwab assets over to a traditional IRA at Schwab? That way I don't have to deal with Fidelity and everything will be done.
No, you can only rollover one-participant 401k plan non-distributable assets upon termination. Then you would be subject to the successor plan rule described by @cowdogman.
by Spirit Rider
Tue Feb 02, 2021 3:25 pm
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

Thank you, Spirit Rider. The problem is, Vanguard does not allow transfer outside assets in so what do I do with the assets in Schwab account? That's why I'm thinking open another i401(k) at Fidelity (I don't have Roth. They are all traditional.) You are incorrect. Vanguard does not allow rollovers . This is not a rollover it is a trustee -> trustee transfer which Vanguard most definitely allows. Can I: 1. first amend Schwab to Vanguard but do nothing to Schwab account (don't tell Schwab yet - but would Vanguard inform Schwab??) 2. then open i401(k) at Fidelity, 3. amend Vanguard to Fidelity, transfer Vanguard assets to Fidelity, 4. go back to Schwab, tell them it's been amended to Fidelity & transfer assets to Fidelity. No, this would...
by Spirit Rider
Tue Feb 02, 2021 11:35 am
Forum: Personal Finance (Not Investing)
Topic: Opened 2 Solo 401(k) by mistake. What to do now?
Replies: 25
Views: 1826

Re: Opened 2 Solo 401(k) by mistake. What to do now?

Unfortunately, I've already contributed to Vanguard. :oops: But I stop contributing to Schwab after Vanguard account was open. A good start. Amending the Schwab Individual 401k to Vanguard is the best option, because it remains the same exact plan and requires no plan termination . The reason I want to keep Schwab is because I want to trade options but can't do that at Vanguard. If I ask Vanguard to change the adoption agreement to "Existing Plan Amendment", can I leave Schwab account open? I am fine with not contributing new fund to Schwab as long as I can still trade with existing funds. No, it is not practically possible to maintain more than a single one-participant 401k plan and leaving the assets in the Schwab Individual 40...
by Spirit Rider
Tue Feb 02, 2021 10:53 am
Forum: Personal Consumer Issues
Topic: Car hit in parking lot (no note)
Replies: 69
Views: 8030

Re: Car hit in parking lot (no note)

I was always under the impression that this type of damage, "hit and run", is covered under your comprehensive insurance if you have it. You may have a deductible involved there also. I recommend you check with your insurance company. I seem to remember my daughter in the early 1990s being struck in a parking lot by such a driver. I think my insurance company paid it under my comprehensive policy, under which I have never had a deductible (had full coverage). YMMV, but certainly not in the four states I have lived in. In fact, my experience is the exact opposite. Comprehensive coverage specifically excludes collision . For example, comprehensive coverage will pay for a stolen car not recovered or damaged due to theft of parts or ...
by Spirit Rider
Mon Feb 01, 2021 4:46 pm
Forum: Personal Finance (Not Investing)
Topic: SEP-IRA S-Corp contribution limit
Replies: 2
Views: 354

Re: SEP-IRA S-Corp contribution limit

Small correction, a maximum employer contribution is 25% of compensation for all employees, but as correctly pointed out by @MP123 For W-2 employees, it is W-2 Box 1* + any Box 12 employee deferrals**. A employer contribution for a self-employed individual is calculated as 20% of business profit - 1/2 SE tax. This is because the employer contribution itself is not compensation. *An S-Corp 2% shareholder-employee's health insurance premiums and/or HSA contributions should be made or reimbursed by the S-Corp and included in their Form 1120S Line 7 Officer's compensation. Then it should be reported in their W-2 Box 1, but not Boxes 3&5, the health insurance premiums claimed as a self-employed health insurance deduction and the HSA contribu...
by Spirit Rider
Mon Feb 01, 2021 4:21 pm
Forum: Personal Finance (Not Investing)
Topic: Is it me or a lot of 2020 tax forms late this year?
Replies: 44
Views: 5763

Re: Is it me or a lot of 2020 tax forms late this year?

Does anyone know why this is? Shouldn't these things be "easy" to auto generate? In the case of some mutual fund's Form 1099-DIV, certain security types deliver or amend their dividend information late. The change to a 2/16 1099-DIV reporting date has actually improved things a lot. While there still are some revised later in the year, it is dramatically better than it used to be. I remember when it was common to have to file an amended return because of late and or amended 1099-DIVs. If you had certain holdings, it was actually easier to automatically file an extension paying any tax due every year. You just knew you were going to have to file an amended return if you didn't. One benefit, it made you fine tune your withholding a...
by Spirit Rider
Mon Feb 01, 2021 4:00 pm
Forum: Personal Consumer Issues
Topic: Car hit in parking lot (no note)
Replies: 69
Views: 8030

Re: Car hit in parking lot (no note)

Unchained wrote: Mon Feb 01, 2021 1:38 pm OP. This should clearly be settled under your uninsured motorist coverage. In my state the deductible would be zero. Doesn’t WA limit the deductible to $300?

You may need to push your insurance company.
In many states, damage does not fall under uninsured motorist coverage. Unless the driver causing the damage is positively identified and determined to be uninsured. An unidentified hit and run falls under collision coverage.
by Spirit Rider
Mon Feb 01, 2021 6:54 am
Forum: Personal Finance (Not Investing)
Topic: Can you have SEP contribution from S-Corp and sole prop?
Replies: 3
Views: 403

Re: Can you have SEP contribution from S-Corp and sole prop?

Under the tax code, your sole proprietorship and S-Corp are considered a controlled group. As such they are considered one employer for employer retirement plan purposes. Additionally, Form 5305-SEP, page 1 indirectly infers it is permitted with the absence of a negative: When not to use Form 5305-SEP. Do not use this form if you: "Are a member of an affiliated service group (described in section 414(m)), a controlled group of corporations (described in section 414(b)), or trades or businesses under common control (described in sections 414(c) and 414(o)), unless all eligible employees of all the members of such groups, trades, or businesses participate in the SEP. " More than one professional TPA has told me to generally consider...
by Spirit Rider
Sun Jan 31, 2021 10:09 pm
Forum: Personal Finance (Not Investing)
Topic: SEP deduction for S-Corp cash basis
Replies: 1
Views: 272

Re: SEP deduction for S-Corp cash basis

This information is readily available.
  1. Yes, Form 1120S Instructions.
  2. Employer contributions deposited by the businesses tax filing deadline including extensions are deducted for the tax year and not the deposit year. Publication 560.
  3. Accounting basis is only relevant to income, expenses and profit. That is the only nexus to employer retirement plan contributions.
by Spirit Rider
Sun Jan 31, 2021 4:59 pm
Forum: Personal Finance (Not Investing)
Topic: SEP IRA for S-Corp <3 years old?
Replies: 5
Views: 410

Re: SEP IRA for S-Corp <3 years old?

speer wrote: Sun Jan 31, 2021 4:49 pm In addition, my W2 income (for my 2020 payroll from this s-corp) I did not enter "Retirement plan" on line 13 of the W2. Does this restrict me from using the SEP IRA for my 2020 taxes?
No, the purpose of that checkbox is for whether you are considered an "active participant" in an employer retirement plan. This only affects whether you are subject to the traditional IRA deduction income limit. It has no bearing on whether you are allowed to make employer retirement plan contributions.

I'm not sure if that is a W-2 error that requires correction. Just don't claim a deduction for a traditional IRA contribution you are not entitled to. Then it would have the appearance of intentional fraud.
by Spirit Rider
Sun Jan 31, 2021 4:52 pm
Forum: Personal Finance (Not Investing)
Topic: SEP IRA for S-Corp <3 years old?
Replies: 5
Views: 410

Re: SEP IRA for S-Corp <3 years old?

The three-year requirement is optional when adopting the SEP IRA plan. If you have no employees or any immediate plan you can elect no employee eligiblity requirements.

It certainly sounds like it would be the same employer unless you filed for a different EIN. Even then it would be a controlled group and they both would be considered one employer for retirement plan purposes.
by Spirit Rider
Sun Jan 31, 2021 11:15 am
Forum: Personal Finance (Not Investing)
Topic: steps to become independent contractor?
Replies: 48
Views: 3346

Re: steps to become independent contractor?

As I already stated and contrary to @vitaflo's blanket assertion. This is dependent on the specific state and/or local jurisdiction. There is no substitute for checking your specific locations.

Federal tax returns are not necessarily the only issue.
by Spirit Rider
Sun Jan 31, 2021 7:40 am
Forum: Personal Investments
Topic: Optimal HSA strategy in retirement
Replies: 46
Views: 5106

Re: Optimal HSA strategy in retirement

You need to start spending down that HSA because at some point, the balance will become too large to offset with medical expenses. If you don't use your HSA, the amount will be fully taxable to your hiers. At 65 they won't need to offset with QMEs. This bucket will not really be any different from their pre-tax retirement accounts. There are some useful HSA distribution strategies in retirement. Take tax-free distributions of your unreimbursed qualified medical expenses before taking qualified Roth distributions. Tax-free distributions without strings are always better. The sooner you exhaust the HSA unreimbursed qualified medical expenses while preserving Roth IRA assets the better. Notwithstanding the above, consider taking RMD-like dist...
by Spirit Rider
Sun Jan 31, 2021 7:08 am
Forum: Personal Finance (Not Investing)
Topic: steps to become independent contractor?
Replies: 48
Views: 3346

Re: steps to become independent contractor?

Depends on if you are using; your name, a fictitious name or a doing business as DBA name and the state's and/or local jurisdiction's business registration requirements. As a general rule you must register the latter two, but not necessarily the former. Also, in many cases can not register if that name is in current active status. Some states/jurisdictions require all businesses to register names. Then there is the question of business licensing and certification that varies by trade/profession and jurisdiction. Bottom Line: YMMV and you need to do the research. If you know ahead of time that you will moving shortly. You need to understand both jurisdictional requirements. Not to mention, if you want to keep the same name should verify the ...
by Spirit Rider
Sat Jan 30, 2021 9:40 pm
Forum: Personal Finance (Not Investing)
Topic: steps to become independent contractor?
Replies: 48
Views: 3346

Re: steps to become independent contractor?

rob wrote: Sat Jan 30, 2021 10:52 am I've worked in and employed people in IT for a very long time... Never seen an individual T&M contractor that would ever qualify if push come to shove (and yeah I have been one also).
You can say anything you want, but that doesn't make it true. I hired dozens of ICs performing only professional services at two different Fortune 500 companies.

That includes one's where IRS Form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding was filed and approved.

That is the IRS explicitly stating that you are wrong. It is not based on some arbitrary rule of thumb. The determination is always subject to facts and circumstances.
by Spirit Rider
Sat Jan 30, 2021 9:06 pm
Forum: Personal Investments
Topic: 401K transfer while employed
Replies: 14
Views: 1570

Re: 401K transfer while employed

Eagle33 wrote: Sat Jan 30, 2021 12:31 am My megacorp allowed in-service rollovers of employee contributions, vested employer match, after-tax contributions, and associated earnings.
Not if those employee contributions were deferrals.

An employer only has discretion on in-service rollovers that are allowed. As already pointed out the tax code and IRS regulations prohibit the in-service rollover of employee deferrals prior to age 59 1/2.
by Spirit Rider
Sat Jan 30, 2021 10:38 am
Forum: Personal Finance (Not Investing)
Topic: steps to become independent contractor?
Replies: 48
Views: 3346

Re: steps to become independent contractor?

For a retiree situation, perhaps consider being a part-time WFH employee. That's what I did. Simpler, but I still set my own hours and can refuse anything I don't want to do. Although the contractor route is probably more lucrative. All depends on what your employer is open to. There are two very important reasons why being an IC can be a far better option. You can adopt a one-participant 401k and make substantial retirement plan contributions. As long as you are not eligible (does not matter if you actually are) to be covered under your or a spouse's employer health insurance plan, you may be able to claim* the self-employed health insurance deduction. NOTE: OP by default in the final Section 199A QBI regulations, an IC of a former W-2 em...
by Spirit Rider
Fri Jan 29, 2021 8:52 pm
Forum: Personal Investments
Topic: Protect rollover IRA from potential lawsuit
Replies: 44
Views: 10159

Re: Protect rollover IRA from potential lawsuit

CorduroyGivenToFly wrote: Fri Jan 29, 2021 7:30 pm Is there a distinction between ERISA for funds in the Brokerage Window (I.e. Fidelity BrokerageLink) portion of the plan vs the regular portion?
No.

Balances in all 401k accounts receive full ERISA anti-alienation asset protection.
by Spirit Rider
Fri Jan 29, 2021 8:42 pm
Forum: Personal Investments
Topic: 401K transfer while employed
Replies: 14
Views: 1570

Re: 401K transfer while employed

I would add that it is only vested employer contributions that can be rolled. Even that is subject to the rules of the plan.
by Spirit Rider
Thu Jan 28, 2021 8:36 pm
Forum: Personal Finance (Not Investing)
Topic: S Corp and QBI Deduction question
Replies: 14
Views: 1546

Re: S Corp and QBI Deduction question

scarabrad wrote: Thu Jan 28, 2021 11:05 am Spirit Rider,

You state in most cases. But when income exceeds $450k for a non-SSTB, is not the QBI deduction limited to 50% of the amount of W2 wages paid? For example, if one had $1.5 million in S corp income, paid out $750k in salaries and took a $750k distribution, a sole proprietor could not benefit from the QBI deduction because of income exceeding $450k, but the S-corp owner could, subject to the W2 limitations above.

Is that analysis correct?
Yes, I was talking in the context of the OP an SSTB. With non-SSTBs the opposite is true The SSTB QBI deduction phase-out range is actually the same as the non-SSTB W-2 wage limitation phase-in range.
by Spirit Rider
Thu Jan 28, 2021 7:39 am
Forum: Personal Finance (Not Investing)
Topic: S Corp and QBI Deduction question
Replies: 14
Views: 1546

Re: S Corp and QBI Deduction question

You can pass the 199A deduction information from your S Corp to your 1040. Why do you think you need to become a sole proprietor? Also, as a physician you’re subject to SSTB limitations, so be aware of that. I suggest you hire a tax accountant or get a new one. The OP knows exactly what they are talking about. The qualified business income of a self-employed individual is limited to their business profit - (1/2 SE taxes + self employed health insurance deduction + pre-tax retirement plan contributions). The qualified business income of an S-Corp 2% shareholder-employee is limited to their distributions - self-employed health insurance deductions. In most scenarios, a taxpayer will receive a substantially larger QBI deduction with a sole pr...
by Spirit Rider
Wed Jan 27, 2021 9:01 pm
Forum: Personal Finance (Not Investing)
Topic: Tax on UTMA dividends when kid turned 18
Replies: 5
Views: 662

Re: Tax on UTMA dividends when kid turned 18

RJ2010 wrote: Wed Jan 27, 2021 8:44 pm He needs to file return so that he can do roth IRA (he did work and had some earned income W2)
A tax return is not required in order to make IRA contributions. The W-2 itself is all the proof of IRA compensation needed.

There no need for him to file a tax return unless he meets one of the filing requirements and/or is due a refund.
by Spirit Rider
Wed Jan 27, 2021 5:59 pm
Forum: Personal Finance (Not Investing)
Topic: Tax on UTMA dividends when kid turned 18
Replies: 5
Views: 662

Re: Tax on UTMA dividends when kid turned 18

Are you sure he is required to file a tax return? Being an adult is not one of the tax filing requirements.

Not to mention, only KY and SD have an 18 UTMA required age of termination. Also SC, because they are the lone UGMA holdout.
by Spirit Rider
Wed Jan 27, 2021 3:40 pm
Forum: Personal Consumer Issues
Topic: Does TV Commercials, Online Ads and Telemarketing Affect Your Consumption Choices?
Replies: 73
Views: 4982

Re: Does TV Commercials, Online Ads and Telemarketing Affect Your Consumption Choices?

capitalhockey wrote: Tue Jan 26, 2021 8:56 am Does TV Commercials, Online Ads and Telemarketing Affect Your Consumption Choices?
There is no way that anyone including you can answer this question with any degree of certainty.

You have absolutely no idea what truly goes into your ultimate conscious and subconscious decision making processes. You may think you know, but you are quite likely deluding yourself.

U.S. companies will spend almost $400 billion on marketing and advertising this year. Nine (9) to ten (10) figures will be spent on the psychology of selling.

We are never as self-aware as we think we are.
by Spirit Rider
Wed Jan 27, 2021 3:23 pm
Forum: Personal Investments
Topic: 529 kindergarten doublecheck
Replies: 4
Views: 525

Re: 529 kindergarten doublecheck

529 qualified distributions must be in the year of the expense. So if you have two separate expenses that occur in two separate years. You can take distributions up to $10K/year that are considered federal tax-free qualified distributions.

However, there is a significant minority of states that have not incoporated this provision into state law or have enacted explicit prohibitions. In these states, such a distribution will be considered a non-qualified distribution. The earnings of the distribution will be subject to state ordinary income tax and penalties.

You will have to check to see what your specific state's tax laws are on this issue.
by Spirit Rider
Wed Jan 27, 2021 2:56 pm
Forum: Investing - Theory, News & General
Topic: wash sale substantially identical question(s)
Replies: 101
Views: 5186

Re: wash sale substantially identical question(s)

I also want to point out that what Vanguard says is almost exactly in line with what alex_686 has said on this forum repeatedly. I think he deserves some credit for that. Some may still want to label it as too conservative but Vanguard saying something has some weight behind it. Hardly, a financial institution's lawyers are always going to require any tax advice to be extremely conservative. Also, I see a lot of people here saying how there is no proof of the IRS disallowing some of these commonly suggested TLH partnerships. How many of the people saying this have actually been audited and received an ok from the IRS for their TLH? Anybody here been through that. Something this critical and momentous would not remain secret for long.
by Spirit Rider
Wed Jan 27, 2021 1:05 pm
Forum: Personal Finance (Not Investing)
Topic: S Corp and QBI Deduction question
Replies: 14
Views: 1546

Re: S Corp and QBI Deduction question

Only you can determine this by estimating the net tax savings over the period of time and whether it is worth it to you. One thing to keep in mind. You can not elect sub-chapter S tax status for five years after you have revoked it.

Caveat: While I am reasonably knowledgeable about tax-advantaged accounts and related issues with regards sole proprietorships. There are far more knowledge people here with regards to detailed S-Corp tax issues.
by Spirit Rider
Tue Jan 26, 2021 11:57 pm
Forum: Personal Investments
Topic: IRA 60 day roll over, limited by source or destination?
Replies: 14
Views: 1743

Re: IRA 60 day roll over, limited by source or destination?

Rollovers are counted by distributions not contributions for purposes of the rule.

1 distribution, 2 contributions = 1 rollover.
2 distributions, 1 contribution = 2 rollovers.
by Spirit Rider
Tue Jan 26, 2021 10:29 pm
Forum: Personal Finance (Not Investing)
Topic: Claiming social security at 70 and half
Replies: 18
Views: 3295

Re: Claiming social security at 70 and half

Most employers contribute some HSA amount monthly to entice the use of CDHP plan. Do you need to inform HR to stop the employer contribution 6 months in advance as well. Not necessarily. Your maximum HSA yearly contribution limit is based on your months of HSA eligibility. It does not matter who those total contributions come from or when they occur. All you need to do is reduce your yearly contributions such that those contributions + the employer contributions do not exceed your HSA maximum contribution limit based on the retroactively reduced months of eligibility. I will give you two examples for 2021. The self-only contribution limit is $3600 and your employer contributes $50/month * 12 = $600. Your maximum yearly contribution limit =...
by Spirit Rider
Tue Jan 26, 2021 12:04 am
Forum: Personal Investments
Topic: Self-Directed IRA vs. Solo 401k
Replies: 10
Views: 1261

Re: Self-Directed IRA vs. Solo 401k

I should mention that I have a SEP IRA (contributed 25% of profit in 2019) and a SIMPLE (no contribution yet) - both opened in 2020. Originally I was going to contribute to SIMPLE for 2019, but I missed the calendar deadline (I did a tax extension until Oct. 15). Since I have an employer sponsored 401K and I contributed about $18,500 for 2020, that means I can only put $1000 into a solo 401K made in 2021. However, it seems I may be better off just putting all $10K into the SIMPLE plan for 2020? A self-directed IRA or one-participant 401k are the last thing you should be thinking about. They are veritable mine fields of prohibited transactions. This post shows just how little you understand about employer retirement plan compliance. You sho...
by Spirit Rider
Mon Jan 25, 2021 7:01 pm
Forum: Investing - Theory, News & General
Topic: wash sale substantially identical question(s)
Replies: 101
Views: 5186

Re: wash sale substantially identical question(s)

alex_686 wrote: Mon Jan 25, 2021 9:44 am The only place I have ever seen this is in this one publication. It is never repeated. This feels like a mistake that got inserted this once, and then was quietly dropped.
It was not just inserted once and quietly dropped. It was repeated ten (10) times from 2000 - 2009.

You find it convenient to summarily dismiss an explicit contradiction to your position, yet you continue to fail to provide any definitive authority for your position.

Bottom Line: You can't, because it doesn't exist.
by Spirit Rider
Mon Jan 25, 2021 8:58 am
Forum: Personal Finance (Not Investing)
Topic: Any way to retroactively fix 8606 forms?
Replies: 20
Views: 2985

Re: Any way to retroactively fix 8606 forms?

Huh?

There is no harm in not filing an unrequired Form 8606, but a benefit of doing so.

Your example is do the right thing or be an immoral unethical grifter, not to mention probably in violation of the insurance contract if not criminal fraud.
by Spirit Rider
Mon Jan 25, 2021 8:42 am
Forum: Investing - Theory, News & General
Topic: wash sale substantially identical question(s)
Replies: 101
Views: 5186

Re: wash sale substantially identical question(s)

I am not aware of any cases of different equity securities being treated as "substantially identical" except for different share classes of the same equity security, options, future contracts, etc... VTSAX and VTI certainly would be substantially identical. VTSAX and another ETF tracking the same index, maybe not. The latest 2009 revision of IRS Publication 564 states; "Ordinarily*, shares issued by one mutual fund are not considered to be sub- stantially identical to shares issued by another mutual fund." There has been no update, other guidance or cases to the contrary. Surprising there has been detailed IRS guidance and case law on what constitutes substantially identical treasury securities. *For those trying to read...
by Spirit Rider
Mon Jan 25, 2021 7:06 am
Forum: Personal Investments
Topic: What to do? High fee retirement accountss
Replies: 17
Views: 1408

Re: What to do? High fee retirement accountss

You can certainly check, but it is unlikely that either of the employer retirement plans will accept rollovers from separated participants. If she has done a Roth conversion of non-deductible traditional IRA contributions this year. Rolling over the 403b and 457b to a traditional IRA would make most of the Roth conversion taxable. I would wait until she has another employer non-IRA employer retirement plan. This would include using the time to generate some self-employment income and adopt a one-participant 401k plan. If she has not done any Roth conversion this year and expects to have another employer non-IRA employer retirement plan within a few years. She can continue to make non-deductible traditional IRA contributions. She just should...
by Spirit Rider
Sun Jan 24, 2021 6:00 pm
Forum: Personal Investments
Topic: Can you have both 529 and UGMA plan
Replies: 5
Views: 578

Re: Can you have both 529 and UGMA plan

Correct.

Texas adopted the model UTMA act on 9/1/1995
by Spirit Rider
Sun Jan 24, 2021 5:51 pm
Forum: Personal Finance (Not Investing)
Topic: Any way to retroactively fix 8606 forms?
Replies: 20
Views: 2985

Re: Any way to retroactively fix 8606 forms?

MarkNYC wrote: Sun Jan 24, 2021 5:20 pm My own view is that it's a good idea to file Form 8606 every year if you have tIRA basis carrying forward, even if there is no requirement to file.
@MarkNYC makes a very compelling case for filing Form 8606 every year when you have non-deductible basis.

@mauwong, I want to revise my previous post. I believe that while there is no need to file prior year form 8606s. I suggest you follow the above advice and have your sister file a 2020 Form 8606 to report the current non-deductible basis and every subsequent year. It doesn't hurt and may prevent future problems.
by Spirit Rider
Sun Jan 24, 2021 5:21 pm
Forum: Personal Finance (Not Investing)
Topic: The Mega Backdoor Roth IRA
Replies: 549
Views: 244689

Re: The Mega Backdoor Roth IRA

Correct
by Spirit Rider
Sun Jan 24, 2021 5:20 pm
Forum: Personal Investments
Topic: Can you have both 529 and UGMA plan
Replies: 5
Views: 578

Re: Can you have both 529 and UGMA plan

First, only SC supports new UGMA accounts. Texas and all other states adopted UTMA accounts.

You can have UTMA accounts and 529 accounts for the same individual, subject to gift tax reporting rules for the combined contributions.