Reacquainting Yourself With The Roth IRA -
Married Filers, The Choice Is Yours
- Scam Calls Are Using IRS as Bait
Yourself With The Roth IRA
If you've looked into retirement planning, you've probably
heard about the Roth IRA.
Maybe in the past you decided against one of these
arrangements, or perhaps you just decided to sleep on it.
Whatever the case may be, now's a good time to reacquaint
yourself with the Roth IRA and its potential benefits, because
you have until April 18, 2016, to make a 2015 Roth IRA
With a Roth IRA, you give up the deductibility of
contributions for the freedom to make tax-free qualified
withdrawals. This differs from a traditional IRA, where
contributions may be deductible and earnings grow on a
tax-deferred basis, but withdrawals (less any prorated
nondeductible contributions) are subject to ordinary income
taxes — plus a 10% penalty if you're under age 59½ at the time
of the distribution.
With a Roth IRA, you can withdraw your contributions tax-free
and penalty-free anytime. Withdrawals of account earnings
(considered made only after all your contributions are
withdrawn) are tax-free if you make them after you've had the
Roth IRA for five years and you're age 59 1/2 or older.
Earnings withdrawn before this time are subject to ordinary
income taxes, as well as a 10% penalty (with certain
exceptions) if withdrawn before you are age 59 1/2.
On the plus side, you can leave funds in your Roth IRA as long
as you want. This differs from the required minimum
distributions starting after age 70 1/2 for traditional IRAs.
For 2016, the annual Roth IRA contribution limit is $5,500
($6,500 for taxpayers age 50 or older), reduced by any
contributions made to traditional IRAs. Your modified adjusted
gross income (MAGI) may also affect your ability to
In 2016, the contribution limit phases out for married couples
filing jointly with MAGIs between $184,000 and $194,000. The
2016 phaseout range for single and head-of-household filers is
$117,000 to $132,000.
Regardless of MAGI, anyone may convert a traditional IRA into
a Roth to turn future tax-deferred potential growth into
tax-free potential growth. From an income tax perspective,
whether a conversion makes sense depends on whether you're
better off paying tax now or later.
When you do a Roth conversion, you have to pay taxes on the
amount you convert. So if you expect your tax rate to be
higher in retirement than it is now, converting to a Roth may
be advantageous - provided you can afford to pay the tax using
funds from outside an IRA. If you expect your tax rate to be
lower in retirement, however, it may make more sense to leave
your savings in a traditional IRA or employer-sponsored plan.
Roth IRAs have become a fundamental part of retirement
planning. Even if you're not ready for one just yet, be sure
to keep the idea of opening one on your radar.
Married Filers, The Choice Is Yours
married couples assume they have to file their tax returns jointly. Others
may know they have a choice but not want to rock the boat by filing
The truth is that there's no harm in at least
considering your options every year.
married taxpayers who file jointly can take advantage of certain credits not
available to separate filers. They're also more likely to be able to
make deductible IRA contributions and less likely to be subject to the
alternative minimum tax.
there are circumstances under which filing separately may be a good idea.
For example, filing separately can save tax when one spouse's income is much
higher than the others, and the spouse with lower income has miscellaneous
itemized deductions exceeding 2% of his or her adjusted gross income (AGI)
or medical expenses exceeding 10% of his or her AGI - but jointly the
couple's expenses wouldn't exceed the applicable floor for their joint AGI.
However, in community property states, income and expenses generally must be
split equally unless they're attributable to separate funds.
Many factors play into the joint vs. separate filing decision. If you're
interested in learning more, please give us a call.
Calls & Emails Using IRS as Bait Still Persist
Scams using the IRS as a lure continue. They take many different forms.
The most common scams are phone calls and emails from thieves who pretend to
be from the IRS. They use the IRS name, logo or a fake website to try to
steal your money. They may try to steal your identity too.
Be wary if you get an out-of-the-blue phone call or automated message from
someone who claims to be from the IRS. Sometimes they say you owe money and
must pay right away. Other times they say you are owed a refund and ask for
your bank account information over the phone. Don't fall for it.
Here are several tips that will help you
avoid becoming a scam victim.
real IRS will NOT:
- Call you to demand immediate payment. The IRS will not call you if
you owe taxes without first sending you a bill in the mail.
- Demand tax payment and not allow you to question or appeal the
amount you owe.
- Require that you pay your taxes a certain way. For example, demand
that you pay with a prepaid debit card.
- Ask for your credit or debit card numbers over the phone.
- Threaten to bring in local police or other agencies to arrest you
- Threaten you with a lawsuit.
If you don't owe taxes or have no reason to think that you do:
- Contact the Treasury Inspector General for Tax Administration. Use TIGTA's
"IRS Impersonation Scam Reporting" web page to report the incident.
- You should also report it to the Federal Trade Commission. Use the "FTC
Complaint Assistant" on FTC.gov. Please add "IRS Telephone Scam" to the
comments of your report.
you think you may owe taxes:
- Ask for a call back number and an employee badge number.
- Call the IRS at 800-829-1040. IRS employees can help you.
In most cases, an IRS phishing scam is an unsolicited, bogus email that
claims to come from the IRS. They often use fake refunds, phony tax bills,
or threats of an audit. Some emails link to sham websites that look real.
The scammers' goal is to lure victims to give up their personal and
financial information. If they get what they're after, they use it to steal
a victim's money and their identity.
you get a ‘phishing' email, the IRS offers this advice:
- Don't reply to the message.
- Don't give out your personal or financial information.
- Forward the email to email@example.com. Then delete it.
- Don't open any attachments or click on any links. They may have
malicious code that will infect your computer.
More information on how to report phishing or phone scams is available on
Each and every taxpayer has a set of fundamental rights they should be aware
of when dealing with the IRS. These are your Taxpayer Bill of Rights.
Explore your rights and our obligations to protect them on IRS.gov.
Remember you can
call our offices if you have any questions about these or any
other accounting, tax, financial planning or insurance related
issues, at 313-388-0300 or our other area offices listed
Regards, Philip Schreiber, CPA
Schreiber Advisors, PC