What happens when you have an over-contribution to your IRA? Are there consequences? How can you resolve this situation without excess penalty?
tax
5 No-No’s for IRA Investing
It is generally well-known that in an IRA account you have a wide range of investment choices. These choices are typically only limited by the custodian’s available investment options. However, there are specific prohibited transactions that cannot be accomplished with IRA funds. Often these prohibited transactions can cause your IRA to be disqualified, which can result in significant tax and penalty, along with loss of the tax-favored status of the funds. What’s Not Allowed for IRA Accounts? Self-Dealing. You are not allowed, within your IRA, to make investments in property which benefits you or another disqualified person. A disqualified person includes your fiduciary advisor and any member of your family, whether an ancestor, spouse, lineal descendant (child) or spouse of a lineal descendant. It is important to note that this limit applies to both present and future use of a property. So if you purchased a condo and rented it […]
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Tax Bill Too High? Try This Trick
Some individuals get the nice surprise of a big tax refund every tax year (if this is you, don’t be too happy – you’ve been lending Uncle Sam money interest free). Other folks get the unpleasant surprise of having to write a big check to Uncle Sam. For the latter individuals, there may be a way to lower their tax bill and save more for retirement. Let’s look at an example. Assume an individual has a tax bill of $4,000 and they want to reduce this. Naturally, there are other deductions they may qualify for, but in this case, they’ve exhausted all other options except this one: saving to their 401k. Let’s also assume this individual’s marginal tax rate is 25%. The individual can take their tax rate and divide it into their tax liability for the year – in this case $4,000 divided by 25%. This comes to $16,000. […]
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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”.