Minor increases to income can result in significant increases to taxation of Social Security benefits, if you’re in the right range of income.
tax
Turns Out You CAN Be A Little Bit Pregnant
Remember back in junior high (or whenever it was) during health class (or sex ed, or whatever they called it for you) – how it was explained that pregnancy is a black or white thing: “nobody gets just a little bit pregnant” was the story my health teacher gave us to remember. As it turns out, there are many other absolutes in life that are similar. However, in a totally characteristic move, the IRS gives us a way that takes something that you think would be absolute, and twists it so that you can, in fact, be a little bit pregnant (or rather, a little bit taxable, a little bit tax free, in this case). Confused yet? Sorry, that wasn’t my intent… some people refer to this as the “cream in the coffee” rule. With this analogy, it is explained that once you put cream in your coffee, you can’t […]
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Roth Conversions for Inherited Retirement Plans
If you have an IRA or a 401(k) that you’ve inherited, you may wonder if it is possible to convert that account over into a Roth IRA. After all, you’ve got to take RMD (Required Minimum Distributions) from the account since it’s inherited, why couldn’t you just pay all the tax upfront and roll it over? Well, there are two answers to this question, one for inherited IRAs, and one for inherited qualified retirement plans (QRPs, such as 401(k) or 403(b) plans). And like many other things in this wonderful tax code of ours, the two kinds of plans are treated differently today, but may be subject to change in the future. It should be noted that we’re talking about non-spouse beneficiaries here. A spouse has pretty much the same rights as the decedent (original owner, now deceased) had, so if the decedent was eligible for a Roth conversion, the […]
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To Gift or Inherit? Deciding When to Bequeath Assets
After beneficiaries are named and you understand how assets are distributed at death, we need to discuss the tax implications of gifted and inherited assets. The following is a description of the tax implications of non-qualified assets (those not in 401(k)s or IRAs) received by beneficiaries if gifted during lifetime or inherited after death. Our example will use stocks in a brokerage account as the assets demonstrating the tax implications of assets gifted during lifetime or inherited at death. Let’s assume that an individual has a brokerage account and they initially purchased $250,000 worth of stock in the account. Several years have gone by and the account as grown to $500,000. For tax purposes the basis in the account is $250,000. The individual is contemplating gifting the account to their beneficiary. If the individual decides to gift the account during their lifetime to their beneficiary, the beneficiary receives the assets […]
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Credits and Deductions
Let’s talk a little bit about tax credits and tax deductions. Both can be used to help reduce or avoid taxation but behave differently when it comes to doing so. Tax deductions are beneficial because help lower the amount of your income subject to taxation. Deductions may be either “above the line” or for AGI, or “below the line” or from AGI. The line in the sand in this scenario is of course, AGI (adjusted gross income). Above the line deductions are beneficial because they reduce gross income to arrive at AGI. A lower AGI may result in being able to take advantages of other benefits in the Internal Revenue Code (IRC) such as being able to contribute to a Roth IRA and qualifying for additional tax credits (discussed below). Common above the line deductions include pre-tax 401(k) contributions, student loan interest, deductible contributions to a traditional IRA, HSA contributions, […]
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Missing a W2? Here’s What to Do…
So – you’re all set to do your taxes. And then… you realize you’re missing something. One of your W2’s hasn’t shown up in the mail. Maybe it was a short-term or a part-time gig, or maybe the business changed hands – or maybe it just got lost in the mail. Whatever the reason, you’re missing one of the documents that you need in order to prepare your tax return. So what do you do? What Do You Do? Your employer is required to send your W2 earnings statement to you by February 1 for the prior year’s earnings. But sometimes things go awry, and you don’t receive the form. There are four steps to follow to retrieve the required information… Contact your employer – inquire if and when the W2 forms were mailed out. It’s possible that the postal service returned it to your employer due to an incorrect […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.