SMD Tax & Divorce Financial Planning Consultants, Inc.

10/18/2021

ROTHs have been receiving a lot of attention lately due to recent proposals made by Congress. At this time, there has NOT been a tax law change, only proposals. However, the news still reminds us that ROTH conversions may become something of the past or may only be available to a limited tax base. There are no income tax limits, currently, as to who is eligible to convert as there once was. However, whether to convert is looked at on a case-by-case basis. ROTHs are a great tax-free retirement savings plan.

What Is It?
A ROTH conversion is when a distribution from an existing traditional IRA or employer sponsored plan is reinvested into a ROTH IRA. The best way to do this is through a trustee-to-trustee transfer but a 60-day rollover and reinvestment period may also be used.

What Is Being Proposed?
As it relates to conversions, the proposal would eliminate Roth conversions for those with incomes over $400,000 for single filers and $450,000 for married filers starting in 2032.

What Can Be Done?
Look at this as an opportunity to have ten years to make annual conversions to help minimize the tax bracket.

Is This Taxable?
Yes, this conversion is considered to be a taxable distribution, except for any “basis” in your retirement account. “Basis” would be that portion of your retirement for which no deduction was received. For an IRA, you should have filed Form 8606 with your return each year to report the basis of all your IRAs. The conversion is, however, not subject to the 10% early withdrawal penalty.

What Are Some Reasons To Convert?
• You think tax rates are likely to go up in the future. Historically, we are in a low tax rate period. Even if there are no new legislation to change tax rates, the current lower rates end in 2025.
• You don’t plan on needing the monies in your IRA and you want to avoid RMDs in the future.
• As a means of reducing your estate tax
• You want to pass on assets to your beneficiaries that will not create taxable income to them when it is paid to them.
• You want to reduce future taxable income before you reach age 65 to avoid additional Medicare premium costs

Which Situations Are Best Suited for a Conversion?
• Younger individuals, since you will likely have many years for the account to grow in value
• Individuals experiencing lower taxable income now but expect higher income in the future
• Individuals who can pay the tax with cash from non-retirement monies
• Individuals whose beneficiaries can wait for the 10-year period before distributing from the inherited ROTH IRA

What If I Change My Mind After I do a Conversion?
Once done, the conversion cannot be undone. Therefore, it is important to be sure of all the tax facts that may impact your decision to convert.

Questions? Please do not hesitate to contact me.

03/19/2021

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12/23/2020

I appreciate the collection of stories, from a child's perspective, of the impact and experience of divorce to the children.

Split A Film About Divorce for Kids and Their Parents , created by documentarian Ellen Bruno , has he… Susan Guthrie needs your support for Split: The Sequel

04/22/2020

Today is the 50th anniversary of the first Earth Day. In honor of Earth Day, I am summarizing some tax credits that are available, for a limited time, for certain expenditures that promote alternative energy source.

Residential Energy Efficient Property Credit:
This credit rate was 30% in 2019, and is reduced to 26% for 2020 and 22% for 2021. Equipment cost and labor are included in calculating the credit.
This credit applies to:
• Qualified solar electric property, such as solar roofing tiles and shingles
• Qualified solar water heating property (as certified by the nonprofit Solar Rating Certification Corporation or comparable entity)
• Qualified small wind energy property, such as wind turbine to generate electricity
• Qualified geothermal heat pump property, equipment that uses the ground or ground water as a thermal energy source; must meet requirements of the Energy Star program.
• Qualified fuel cell property

These properties may be installed in an existing home or newly constructed home and all the above qualifying expenditures, except the qualified fuel cell property credit, can be installed in any home in the US, not just your principal residence. However, costs allocable to swimming pools and hot tubs do not qualify.

Any unused credit may be carried over to the following year.

Electric Vehicle Tax Credit:
If you are in the market for a new plug-in vehicle, check with the dealer as to which models are still eligible. The amount of the credit varies by model and the credit begins to phase out after a certain number of vehicles have been sold in the US.

Nonbusiness Energy Property Credit:
This credit is extended through 2020. The total combined credit limit is $500 for all years after 2005 and applies to expenditures on existing main homes only.
• Qualified energy efficiency improvements, such as exterior windows, skylights, exterior doors, and insulation; maximum cost of $2,000 and excludes labor. Credit is 10%
• Residential energy property costs: (all have varying maximum credits ranging from $50 to $300)
o heat pumps, central A/C, and water heaters
o Stoves using biomass fuel
o Natural gas, propane, or oil furnaces or hot water boilers
o Qualified advanced main air-circulating fan

04/16/2020

April 16th is National Healthcare Decisions Day. This follows National Tax Day. Two national holidays focused on two certainties in life, according to Benjamin Franklin, death and taxes. So, in celebration of National Healthcare Decisions Day, I share with you the following:

Living Wills & Health Care Powers of Attorney:
Use this holiday to review your advance directive documents- Living Will Declaration and Health Care Powers of Attorney. If you have not completed these documents, you can find the State of Ohio forms on the Ohio State Bar Associations website (www.ohiobar.org). According to an expert I was listening to today, Dr. Mary Jo Prince-Paul, never put these in a lockbox or under a mattress. You want someone to know where these important documents can be found when needed. Use this annual holiday as a reminder to review these documents, making sure they coincide with your current wishes. These documents are important to all adults, not just older adults.

Conversation Project:
The Conversation Project is an initiative of the Institute for Healthcare Improvement. Having conversations about end-of-life wishes is one that most people are avoiding. According to their findings, 92% of Americans say it’s important to discuss end-of-life care, yet only 32% have had such a conversation. The Conversation Project offers resources and tools to help with these very difficult yet important conversations. Information can be found at www.theconversationproject.org.

Making decisions about end-of-life care is not easy. Having to do this while a crisis is occurring is even harder. Do this for you. Do this for your loved ones.

Stay Safe!

04/10/2020

Several time-sensitive matters to be aware of:

• Required Minimum Distributions (RMD):
You have 60 days to recontribute a 2020 RMD. This may be an action one wants to take advantage of if they don’t rely on the RMD to cover expenses.

• Prepare to Make a 2nd Qtr. Federal Estimated Tax Payment:
As of this writing, only the 1st Qtr. Estimated Tax payment has been extended to July 15th. 2nd Qtr. Estimated Tax payments, which are due June 15, 2020, have not yet been extended. You may need to have your 2019 tax return done well before the July 15th in order to meet the June 15th deadline.

• 2nd Quarter 2020 Payroll Tax filings:
As of this writing, payroll tax filings have not been granted an extended filing date. Therefore, April 30th is still the filing date for the 1st Quarter (Jan-March)

• 2019 Business Tax Filings:
As of this writing, businesses with a December 31, 2019 year end are still required to file tax returns by the normal tax deadlines. Partnership returns and S Corporation returns were due by 3/15. Those returns would have either been filed by now or extended. Regular C Corporations have a due date of 4/15. Extensions will need to be requested by those who are not able to file by 4/15.

Stay Safe!
Susan A Moussi CPA, CFP®, CDFA, CFT-1™

04/08/2020

This is a bullet point summary of the Recovery Rebate provision contained in the Coronavirus Aid, Relief and Economic Security (CARES) Act, HR 748:

Recovery Rebates:

$1,200 to eligible individual filers/$2,400 to eligible joint filers

$500 for each qualifying child. “Qualifying child” has the same definition as used for the child tax credit. Therefore, under age 17.

Phase-out of eligibility when AGI is above:
$75,000 Single and MFS filers
$150,000 Married Filing Joint filers
$112,500 HOH

Treated as an advance of a 2020 tax credit.
There will be a reconciliation of the credit on your 2020 tax
return.
2020 reconciliation will not result in a negative amount
(meaning you will not owe money back)