I quit my job. What are some tax considerations I should make for TY2020?

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TorusSpotter
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I quit my job. What are some tax considerations I should make for TY2020?

Post by TorusSpotter »

Hi all,

As the subject says I quit my job. I'm not sure if I'll have any taxable income at all in 2020 - if I do it will probably be low. Off the top of my head I should:
- Take 40k in capital gains
- Cannot contribute to an IRA unless I make $6k in income somehow? Normally I do the backdoor roth - if I manage to make income it would actually fall under the tIRA limits this year, but my total income would likely be so low that I might as well still convert it to roth because my income would be under the standard deduction amount. Does that sound right?
- I think when I quit I'm allowed to convert some traditional 401k holdings to my roth IRA, but it depends on the plan? Is there a time limit on this?
- Any other things I should do?

Thanks in advance,
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Stinky
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by Stinky »

TorusSpotter wrote: Tue Dec 31, 2019 2:08 pm Hi all,

As the subject says I quit my job. I'm not sure if I'll have any taxable income at all in 2020 - if I do it will probably be low. Off the top of my head I should:
- Take 40k in capital gains
- Cannot contribute to an IRA unless I make $6k in income somehow? Normally I do the backdoor roth - if I manage to make income it would actually fall under the tIRA limits this year, but my total income would likely be so low that I might as well still convert it to roth because my income would be under the standard deduction amount. Does that sound right?
- I think when I quit I'm allowed to convert some traditional 401k holdings to my roth IRA, but it depends on the plan? Is there a time limit on this?
- Any other things I should do?

Thanks in advance,
On converting traditional 401(k) to Roth IRA, you can go through a two step process. First, roll your 401(k) assets to a traditional IRA. Then, convert the IRA to a Roth.

On another front - do you have a plan for health insurance for 2020?
It's a GREAT day to be alive - Travis Tritt
Topic Author
TorusSpotter
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by TorusSpotter »

Stinky wrote: Tue Dec 31, 2019 2:20 pm On another front - do you have a plan for health insurance for 2020?
Yes, my health insurance plan is to not get sick.

Re: doing trad 401k -> trad IRA -> roth IRA, are you saying this is always allowed regardless of my plan? Does it have pro-rata implications for me? Also would this conversion count as taxable income I could use for my IRA contribution?
Last edited by TorusSpotter on Tue Dec 31, 2019 2:25 pm, edited 1 time in total.
livesoft
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by livesoft »

I think you should get into the habit of reading one IRS tax publication per week. They are all free:

https://www.irs.gov/publications
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02nz
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by 02nz »

TorusSpotter wrote: Tue Dec 31, 2019 2:22 pm
Stinky wrote: Tue Dec 31, 2019 2:20 pm On another front - do you have a plan for health insurance for 2020?
Yes, my health insurance plan is to not get sick.

Re: doing trad 401k -> trad IRA -> roth IRA, are you saying this is always allowed regardless of my plan? Does it have pro-rata implications for me? Also would this conversion count as taxable income I could use for my IRA contribution?
Always allowed if you're separated.

Pro-rata only comes in if: you don't convert the full amount of the rollover and leave a balance in the trad'l IRA, and then later want to do the backdoor Roth.

Conversion does not count as compensation and so does not qualify for for an IRA contribution.

If you just quit your job and some earnings will be paid in calendar year 2020, though, that counts for that year.
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Stinky
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by Stinky »

TorusSpotter wrote: Tue Dec 31, 2019 2:22 pm
Stinky wrote: Tue Dec 31, 2019 2:20 pm On another front - do you have a plan for health insurance for 2020?
Yes, my health insurance plan is to not get sick.
Personally, I wouldn’t feel comfortable with that plan.

I hope that it works out for you.
It's a GREAT day to be alive - Travis Tritt
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Kenkat
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by Kenkat »

I’m gonna lead in with get another job...
Topic Author
TorusSpotter
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by TorusSpotter »

Stinky wrote: Tue Dec 31, 2019 3:04 pm Personally, I wouldn’t feel comfortable with that plan.

I hope that it works out for you.
I don't feel comfortable with it but that's America for you.
HomeStretch
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by HomeStretch »

TorusSpotter wrote: Tue Dec 31, 2019 5:12 pm
Stinky wrote: Tue Dec 31, 2019 3:04 pm Personally, I wouldn’t feel comfortable with that plan.

I hope that it works out for you.
I don't feel comfortable with it but that's America for you.
If you will have no or low income for 2020, you may be eligible for Medicaid or an ACA plan with very low premiums (perhaps no premiums). You can get an estimated cost at healthcare.gov or your state healthcare exchange.
StealthRabbit
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by StealthRabbit »

Harvest any gains
Roth rolls (from Tira)


If below age 70, and 401k internal investment and expense options are reasonable, I personally would NOT convert 401k to IRA (better asset protection in 401k)

Get enough 'earned income' to cover expenses + IRA and HSA contributions
Reside in a income tax free state with a very beneficial ACA exchange (NO HC is NOT an option if living in USA, cannot risk emergency expense potential bankrupting). Can live outside of USA and have inexpensive insurance and HC Self Pay.

Need something to do with your time and money? Consider doing a few new homes (NO capital gains (tax free exclusion) on personal residence once every 24 months) $250k / $500k (Single / married)

Why work? :sharebeer
Dottie57
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Re: I quit my job. What are some tax considerations I should make for TY2020?

Post by Dottie57 »

TorusSpotter wrote: Tue Dec 31, 2019 2:22 pm
Stinky wrote: Tue Dec 31, 2019 2:20 pm On another front - do you have a plan for health insurance for 2020?
Yes, my health insurance plan is to not get sick.

Re: doing trad 401k -> trad IRA -> roth IRA, are you saying this is always allowed regardless of my plan? Does it have pro-rata implications for me? Also would this conversion count as taxable income I could use for my IRA contribution?
Take the Cobra insurance from your former employer.
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