Recent Developments

Roth Tax Tip:  A common conversion approach is to divide your IRA into separate IRAs converting each with investments in different asset classes. The ones that don’t appreciate you re-convert to regular IRAs so you don’t have to pay income tax on a unfavorable investment result.  Everyone in your foursome converted their IRA to a Roth so you jump on the bandwagon. Check out your State estimated tax payments. If you don't pay in enough your extension may not be valid. This can be tricky. If you made estimates assuming some IRAs would be reconverted from Roth to regular IRAs, you could void your state extension. Pay estimated state tax as if reconversion isn't an option


Roth Drafting Tip:   If you have a large Roth conversion consider amending your durable power of attorney and will to authorize your fiduciaries (agent, executor) to reconvert a Roth back to a regular IRA, or to convert a regular IRA to a Roth. Caution – if the beneficiaries of the IRA (regular or Roth conversion) are different then those receiving gifts under your power, or bequests under your will, clarify how this should be addressed.


FICA Taxes: Severance payments made by a bankrupt retailer to employees were not subject to Social Security taxes. Quality Stores (D.C. Mich). The IRS is likely to appeal this pro-taxpayer court ruling so the “jury is still out.” However, it may be advisable for companies to file protective refund claims on Form 843. The statute of limitations (the time period during which a claim can be filed) for 2006 years is almost over (3 years after the due date of tax return).  Severance payments refunds may also be available for 2007 and 2008, and you will need to take this new case into consideration for 2009. Thanks Julie Welch, CPA, CFP, of Meara Welch Browne, P.C., Kansas City, MO.

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