tax planning questions (MAGI, Stimulus check & misc.)

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capran
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Joined: Thu Feb 18, 2016 10:45 am

tax planning questions (MAGI, Stimulus check & misc.)

Post by capran »

I re-read the thread on the stimulus check after seeing line 30 "recovery rebate credit. See instructions" on the 2020 draft 1040. Of course, there are no instructions yet, but am thinking I should keep my MAGI down to at least 171k so that if they somehow create a way to reclaim the credit as income that would put us over the 174 IRMAA level. We did get a stimulus check based on our 2018 income which resulted in $2398.45 in May, as we were barely over 150k, and then we filed our 2019 taxes. But not sure if instead of 171k we should instead keep it at 150 so we can keep the whole stimulus check? Also as an aside, wondering if I need to wait until the 3rd week of December to do my IRA to Roth Conversion because of any last minute involuntary bond redemptions. Last year we received a notice the second week of December that a large bond was being redeemed but it, and several subsequent bonds were redeemed through out this year. Those are all known, but I'm worried there is one other bond I hold that pays a substantial interest rate (6.2) and that they might do a last minute redeem it which could add an additional 3000 capital gain at literally the last minutes of 2020. Are companies required to give a certain amount of notice when redeeming their corporate bonds early?

any insights?
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FiveK
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by FiveK »

You won't have to give any of the $2398.45 back, no matter what your 2020 income. At best you'll get a $2 refund this year: rounded up from $1.55, so you would be $0.45 to the good. :)
terran
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by terran »

They're also still only a draft, but there actually are 2020 Form 1040 instructions. Instructions for the line 30 recovery rebate are on page 56.
carolinaman
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by carolinaman »

Will the stimulus check increase MAGI? That is important to me to avoid exceeding IRMAA threshhold. Thanks
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FiveK
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by FiveK »

carolinaman wrote: Sat Nov 28, 2020 9:16 am Will the stimulus check increase MAGI? That is important to me to avoid exceeding IRMAA threshhold. Thanks
No, it will not affect any MAGI, including MAGI for Medicare premiums (IRMAA tiers).
Topic Author
capran
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by capran »

terran wrote: Fri Nov 27, 2020 10:33 pm They're also still only a draft, but there actually are 2020 Form 1040 instructions. Instructions for the line 30 recovery rebate are on page 56.
Thanks for posting the draft instructions link. It does say on page 56, basically, that you only enter an amount on line 30 if either you did not receive an economic recovery stimulus check or if you by virtue of your 2020 income qualify for a greater amount of the married 2,400 (if your income was below 150.) so it looks like I am clear to go ahead and at least keep close to that 171k figure. That way I'd still have a 3k margin before going over IRMAA threshhold, which even if they somehow figured a way to make that as includable income, I could just squeak by, as long as I don't get an additional surprise of another bond being involuntarily redeemed. Might wait till the 3rd week of December just to be sure before I convert. (pardon my mistrust of all things government, but look how they quietly passed the stopping of the inherited roth after a 10 year holding.) think I will use the updated tax computation numbers in the draft to see if it changes the tax owed by much.

Thanks all!
carolinaman
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by carolinaman »

FiveK wrote: Sat Nov 28, 2020 10:09 am
carolinaman wrote: Sat Nov 28, 2020 9:16 am Will the stimulus check increase MAGI? That is important to me to avoid exceeding IRMAA threshhold. Thanks
No, it will not affect any MAGI, including MAGI for Medicare premiums (IRMAA tiers).
thanks FiveK
jhawktx
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by jhawktx »

Why not wait until late December in the base case? There are advantages to waiting. I'm not aware of any disadvantages to waiting.
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capran
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Re: tax planning questions (MAGI, Stimulus check & misc.)

Post by capran »

jhawktx wrote: Mon Nov 30, 2020 12:15 pm Why not wait until late December in the base case? There are advantages to waiting. I'm not aware of any disadvantages to waiting.
just like to get things done, and don't really want to be spending Christmas time doing it, but with COVID, maybe that really doesn't matter this year. but we can have power outages this time of year, but I guess I could call on the phone. makes sense to at least wait until the 3rd week of December. I really do expect that the last high paying bond would be redeemed just like the other three earlier this year. Oh well, at least I am reasonable sure that I don't have to pay back the stimulus if I opt for increasing our income/conversion, and at 171k still leaves me @ 3000 margin of error. Just hoping I can get as much of the IRA converted before RMD age. going to be close, but not a terrible problem to have. (although I said in a different post, I sure wish I would have deferred less since now we're in a higher tax bracket than when working.
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