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NUA and the Roth Conversion

Can you use a Roth conversion for NUA-treated stock? Unfortunately no, and this article explains why it’s not an option.

Social Security for the Self-Employed

As a self-employed small business owner, you have lots of plates to keep spinning, and lots of additional costs that you never dreamed of when you were employed by someone else (if you ever were), like health insurance, for example.  Another cost that you have to deal with when self-employed is Self-Employment tax. Self-Employment tax (SE tax) is essentially where you are paying both the employER and the employEE portion of the Social Security withholding tax.  This means that, for 2018, you are taxed at a rate of 12.4% on your first $128,700 of income (double the rate you’d have withheld if you were employed by someone else).  This doesn’t count the 2.9% that you also have to withhold for Medicare tax – which is another matter altogether. With this in mind, you might wonder if there are ways that you could reduce the Self-Employed tax…?  One way might be […]

Why Designations Matter

Throughout my career I have had the occasion to talk with several financial advisors, planners, insurance agents, brokers, and other industry professionals about some of the reasons why people choose to pursue or not to pursue designations. I have heard differing views on the topic and thought I’d share some of my insights as to why I chose and still choose to pursue designations and degrees. Before I do, let me start by talking about some of the reasons why the advisors I have spoken to decide not to earn a designation. More often than not, the typical answers that I receive are not having enough time, not sure which designation to pursue, lack of funding to afford the designation, and lack of support on earning the designation – either from their employer or family. On the latter two points, some companies may not be able to “support” the designation […]

The Roth Recharacterization

1/1/2018 Note: Recharacterization of Roth conversion is no longer allowed as of tax year 2018. The last tax year that you could recharacterize Roth conversions is 2017. See Roth Recharacterization is No Longer Allowed for more details. After all the hoopla around Roth conversions in 2010, now is the time to consider whether or not a recharacterization is in your future.  So what is a recharacterization, and how does it work? Recharacterization is the “backing out” of your Roth conversion.  In other words, you can literally make the conversion as if it had never been done at all, with your money back in the traditional IRA where it started. Why would you want to do that?  Here’s an example: let’s say you converted $100,000 to a Roth IRA in 2010 and you are ready to pay the tax on your 2010 return (you elected out of the spread to 2011 […]