TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

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I don't recall if it was for IRA's or 401ks but recall that the Republicans actually tried to lower the contribution limits as part of Tax Reform under Trump, shockingly.

Washington absolutely does not want us to build wealth regardless of party.

mosdefn14 said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

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It's not the $6000 so much as the $58k mega backdoor they're going after.

However, most doing this strategy are going to be upwards of 40 years old and have already paid tax on it at 33%+, so it's really just the $58k doubling 4 or 5 times over the next 40ish years that is at issue.

The dems got a big win with the RMDs on inherited (Roth) IRAs. Roth 401ks have RMDs for the original owner, kind of expect to see RMDs added for Roth IRAs. While not taxable, it pulls another 10-30 (20 year life expectancy + 10 year stretch) years of tax free growth out into the taxable world.

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This is a new one to me. I had to Google it. If I understand it correctly, you're making after tax contributions to your 401k up to the total $58k limit and then immediately rolling those contributions over to a Roth 401k and/or Roth IRA?

Good grief…all I want to do is put $19,500 tax free in my 401k and $6k in my Roth. Why do our lawmakers make these programs with SO many loopholes? And then want to punish the rest of us when the super-wealthy take advantage of said loopholes?

YouBet said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

I don't recall if it was for IRA's or 401ks but recall that the Republicans actually tried to lower the contribution limits as part of Tax Reform under Trump, shockingly.

Washington absolutely does not want us to build wealth regardless of party.

---

Oh, yes, I remember. That was a stinker of a plan when they first rolled it out. Every time I see Kevin Brady at my local Y, I want to call him out on it.

TXTransplant said:

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mosdefn14 said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

It's not the $6000 so much as the $58k mega backdoor they're going after.

However, most doing this strategy are going to be upwards of 40 years old and have already paid tax on it at 33%+, so it's really just the $58k doubling 4 or 5 times over the next 40ish years that is at issue.

The dems got a big win with the RMDs on inherited (Roth) IRAs. Roth 401ks have RMDs for the original owner, kind of expect to see RMDs added for Roth IRAs. While not taxable, it pulls another 10-30 (20 year life expectancy + 10 year stretch) years of tax free growth out into the taxable world.

---

This is a new one to me. I had to Google it. If I understand it correctly, you're making after tax contributions to your 401k up to the total $58k limit and then immediately rolling those contributions over to a Roth 401k and/or Roth IRA?

Good grief…all I want to do is put $19,500 tax free in my 401k and $6k in my Roth. Why do our lawmakers make these programs with SO many loopholes? And then want to punish the rest of us when the super-wealthy take advantage of said loopholes?

---

Yeah, I want to echo this sentiment as well. I think there are some tax increases that make sense, despite my generally fiscal conservative stances...but why are we punishing the vast, vast majority of individuals on saving for their future? Edit: this is rhetorical...not really asking. I'm more just frustrated.

I'm someone else who just wants to max out my pre-tax 401k and put in $6k/year in a Roth, then handle the rest in a taxable account. I've thought about a mega backdoor, but preferred the flexibility of a taxable account at this point, and I would have never gotten close to the max. I get that I'm "privileged" to be in this position, but I'm not so privileged to not balk at throwing $58k or whatever the max is into a retirement account and not miss a beat.

I don't understand why you can't get rid of mega backdoor Roths and leave us normal minions alone. Because the fact is, most people who can take full advantage of a mega backdoor Roth enough to "abuse it" and build crazy wealth will likely have alternative investments available to them and skirt loopholes another way.

The leaked info is they are only closing this to individuals who have over $10mm in retirement accounts. Maybe they mean in Roth accounts. Either way, it won't hit too many folks until you are maybe 55 unless you rock it on returns.

YouBet said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

I don't recall if it was for IRA's or 401ks but recall that the Republicans actually tried to lower the contribution limits as part of Tax Reform under Trump, shockingly.

Washington absolutely does not want us to build wealth regardless of party.

---

This to me is the issue. 401ks and IRAs are a major untapped source of income for the government. The problem is - social security is bankrupt or soon to be, and isn't enough for a comfortable life in retirement so people have had to save on their own. Yes, that's a position a lot of folks aren't in, for a variety of reasons, but why put MORE strain on social security by making it harder for those who CAN save to do so?

****ing let them save money. I get that the majority of politicians will never have to bat an eyelash at the idea of not having enough for retirement, but let citizens save and don't punish them for doing it. Or, just get rid of tax-advantaged accounts altogether at this point.

That's good to know. I've been trying to get clarification on some of the tax plan and have seen a ton of conflicting information. Thanks for the info.

I'll take some of my fire and brimstone back.

So, if you have <$10 million in retirement, you would still be able to participate in a backdoor Roth?

Sounds like a great plan, but how are they a going to enforce it? I don't report how much I have in my retirement accounts when I do my taxes. Whether or not I can contribute to the Roth is solely a function of my AGI (and following the instructions for reporting the backdoor Roth conversion correctly).

TXTransplant said:

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mosdefn14 said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

It's not the $6000 so much as the $58k mega backdoor they're going after.

However, most doing this strategy are going to be upwards of 40 years old and have already paid tax on it at 33%+, so it's really just the $58k doubling 4 or 5 times over the next 40ish years that is at issue.

The dems got a big win with the RMDs on inherited (Roth) IRAs. Roth 401ks have RMDs for the original owner, kind of expect to see RMDs added for Roth IRAs. While not taxable, it pulls another 10-30 (20 year life expectancy + 10 year stretch) years of tax free growth out into the taxable world.

---

This is a new one to me. I had to Google it. If I understand it correctly, you're making after tax contributions to your 401k up to the total $58k limit and then immediately rolling those contributions over to a Roth 401k and/or Roth IRA?

Good grief…all I want to do is put $19,500 tax free in my 401k and $6k in my Roth. Why do our lawmakers make these programs with SO many loopholes? And then want to punish the rest of us when the super-wealthy take advantage of said loopholes?

---

Look at the ProPublica article I posted. Peter Thiel worked a unique loophole in his Roth that very few have ever done.

YouBet said:

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TXTransplant said:

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mosdefn14 said:

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TXTransplant said:

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I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

It's not the $6000 so much as the $58k mega backdoor they're going after.

However, most doing this strategy are going to be upwards of 40 years old and have already paid tax on it at 33%+, so it's really just the $58k doubling 4 or 5 times over the next 40ish years that is at issue.

The dems got a big win with the RMDs on inherited (Roth) IRAs. Roth 401ks have RMDs for the original owner, kind of expect to see RMDs added for Roth IRAs. While not taxable, it pulls another 10-30 (20 year life expectancy + 10 year stretch) years of tax free growth out into the taxable world.

---

This is a new one to me. I had to Google it. If I understand it correctly, you're making after tax contributions to your 401k up to the total $58k limit and then immediately rolling those contributions over to a Roth 401k and/or Roth IRA?

Good grief…all I want to do is put $19,500 tax free in my 401k and $6k in my Roth. Why do our lawmakers make these programs with SO many loopholes? And then want to punish the rest of us when the super-wealthy take advantage of said loopholes?

---

Look at the ProPublica article I posted. Peter Thiel worked a unique loophole in his Roth that very few have ever done.

---

Yeah, I remember that discussion. That was a bit different though, right? He funded his Roth with stock options that had an initial value of fractions of a penny, correct? Then when the company went public, everything above and beyond his paltry "investment" (which I don't think was even close to $6k) became an untaxable gain.

There are so very few of us who contribute to a Roth who would ever be able to replicate something like that, so while I get people are frustrated by the loophole, it's not like most people are getting rich and avoiding taxes that way. There was just a ridiculous large sum of money involved, and it made a good headline.

TXTransplant said:

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YouBet said:

---

TXTransplant said:

---

mosdefn14 said:

---

TXTransplant said:

---

I know. But the Roth income limits are pathetically low. I'm single, HoH, and it phases out at an AGI between $125-$140k. That's pitiful. Might as well just do away with it altogether, if they don't want any tax-free investment accounts.

---

It's not the $6000 so much as the $58k mega backdoor they're going after.

However, most doing this strategy are going to be upwards of 40 years old and have already paid tax on it at 33%+, so it's really just the $58k doubling 4 or 5 times over the next 40ish years that is at issue.

The dems got a big win with the RMDs on inherited (Roth) IRAs. Roth 401ks have RMDs for the original owner, kind of expect to see RMDs added for Roth IRAs. While not taxable, it pulls another 10-30 (20 year life expectancy + 10 year stretch) years of tax free growth out into the taxable world.

---

This is a new one to me. I had to Google it. If I understand it correctly, you're making after tax contributions to your 401k up to the total $58k limit and then immediately rolling those contributions over to a Roth 401k and/or Roth IRA?

Good grief…all I want to do is put $19,500 tax free in my 401k and $6k in my Roth. Why do our lawmakers make these programs with SO many loopholes? And then want to punish the rest of us when the super-wealthy take advantage of said loopholes?

---

Look at the ProPublica article I posted. Peter Thiel worked a unique loophole in his Roth that very few have ever done.

---

Yeah, I remember that discussion. That was a bit different though, right? He funded his Roth with stock options that had an initial value of fractions of a penny, correct? Then when the company went public, everything above and beyond his paltry "investment" (which I don't think was even close to $6k) became an untaxable gain.

There are so very few of us who contribute to a Roth who would ever be able to replicate something like that, so while I get people are frustrated by the loophole, it's not like most people are getting rich and avoiding taxes that way. There was just a ridiculous large sum of money involved, and it made a good headline.

---

Yes, it was different and an extreme outlier but that lone story has driven much of the outrage and clamor for change in the forthcoming Roth changes.

As someone who is doing a mega backdoor Roth currently, I'm pissed.

Just got this quick summary from my FA on a readout of proposed tax changes:

• Reinstatement of highest individual tax bracket of 39.6% (to include individuals with annual incomes >$400,000 and married couples of >$450,000)
• New capital gains rate of 25% effective September 13 (same applies to dividend income)
• New 3% surtax on individuals with annual AGI over $5 million
• No elimination of step-up basis
• Reinstatement of former estate tax exemption amount of $5.5 million for individuals ($11 million for married couples) to be effective on January 1, 2022
• No SALT provisions in the draft of the bill
• New corporate tax rate of 26.5%
• No provisions relating to 1031 real estate exchanges

Hadn't seen bolded yet.

Come on Manchin!

The IRS asks for the balance on the tax return now. They ask, but I haven't seen anything on follow through if you don't provide it.

I also have seen some CPAs ask their clients for that info.

I do know that the IRS receives a 5498 from all IRA accounts from the company that holds them. On that 5498, it shows the balance.

How they work that with a 401k, I have no clue.

Harkrider 93 said:

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How they work that with a 401k, I have no clue.

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401k balances are captured as part of plan compliance testing. My bet is it comes from there.

Pooled profit sharing plans and cash balance plans, who knows. Generally it's a bookkeeper who maintains that on a spreadsheet.

Right, but do they really see the info broken down by SSN?

edit - I see how they could get it from that. Thanks

Harkrider 93 said:

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The IRS asks for the balance on the tax return now. They ask, but I haven't seen anything on follow through if you don't provide it.

I also have seen some CPAs ask their clients for that info.

I do know that the IRS receives a 5498 from all IRA accounts from the company that holds them. On that 5498, it shows the balance.

How they work that with a 401k, I have no clue.

---

Yeah, I was wondering about the 401k. I do report my Roth balance when I report the backdoor conversion.

Sounds like there might be a mechanism for it, but that's a lot of data for the IRS to keep track of and assign to taxpayers correctly. Let's say I'm skeptical they could do it.

Honestly, it's probably people with anything in a 401k that the government will want a bigger bite out of…or you will see all sorts of stipulations about 401k Roth balances disqualifying you SS payouts.

There are a ton of people that either can't, or don't want to save money on their own. They will be the benefactors.

evan_aggie said:

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Honestly, it's probably people with anything in a 401k that the government will want a bigger bite out of…or you will see all sorts of stipulations about 401k Roth balances disqualifying you SS payouts.

There are a ton of people that either can't, or don't want to save money on their own. They will be the benefactors.

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For sure. Too much money sitting there untouched coupled with full blown socialism. It will be the only way to pay for some of it.

I remember back when Bush tried to privatize SS and encourage individual savings. That didnt go very well.

"The people" were way to used to SS as it is. And eventually it will bankrupt us.

BTW, I forgot to add this when and where I read it, but I read yesterday that Biden said anyone making below his arbitrary $400k threshold will get a "monumental" tax cut.

Monumental may not have been the exact word he used but it was an equivalent, dramatic word. Sorry, I can't recall where I read this but it is was when I was digging around in the news for other tax information.

No details and no idea what he means by that considering most people already pay nothing in tax.

I just got an interesting email from a banker. Apparently there is legislation going through Washington. They want banks to report all transactions on all accounts with balances over $600 to the IRS.

I don't have any details and do not pretend to know how far along this is, but wanted to pass on.

As mentioned we are doing a full in-depth webinar over Biden tax soon.

Next Tuesday we are talking about how to combat this assault, control the amount of tax you pay, and invest without tax consequences.

Will also cover how you can protect your retirement accounts from taxes and keep 90% of the balance.


Direct Link: https://americanwealthstrategist.hubspotpagebuilder.com/texags-09/21/21-0

Sponsored Post is above.

That got nixed, but surprising how close it got to making the bill.

Harkrider 93 said:

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That got nixed, but surprising how close it got to making the bill.

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It did? Hadn't heard that.

I think the article came out on Tuesday. Some Republican House Rep (Neb, I think) wrote how dangerous it was and how he and a few others fought to keep it out.

Harkrider 93 said:

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I think the article came out on Tuesday. Some Republican House Rep (Neb, I think) wrote how dangerous it was and how he and a few others fought to keep it out.

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Good to hear there are still some Republicans alive and breathing. Been wondering if they still existed.

Harkrider 93 said:

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That got nixed, but surprising how close it got to making the bill.

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Are you sure? This just came out today. You would think, over a week later, they would be aware of it being taken out if it actually was.

https://www.foxbusiness.com/politics/biden-irs-bank-account-proposal-opposition

khkman22 said:

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Harkrider 93 said:

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That got nixed, but surprising how close it got to making the bill.

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Are you sure? This just came out today. You would think, over a week later, they would be aware of it being taken out if it actually was.

https://www.foxbusiness.com/politics/biden-irs-bank-account-proposal-opposition

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Yeah I'm thinking it didn't get nixed.

https://www.wsj.com/articles/yellen-irs-push-democrats-to-require-banks-to-report-annual-account-flows-11631727020

May not work and not the same article I read, but it wasn't put in. Maybe they put it back?

so when does this start to get moving?

BO297 said:

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I just got an interesting email from a banker. Apparently there is legislation going through Washington. They want banks to report all transactions on all accounts with balances over $600 to the IRS.

I don't have any details and do not pretend to know how far along this is, but wanted to pass on.

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I get news for ya about the BSA/AML reporting requirements that have been on the books since the 1970's.

You can read it all here https://www.fincen.gov/resources/statutes-regulations/fincens-mandate-congress