Congress Looking to Reform Roth IRA Regulations

roth ira taxes Jul 14, 2021

Back on June 30, we posted about the ProPublica article exposing Peter Thiel and other wealthy individuals use of Roth IRAs to shelter millions (even billions) of dollars from taxes.

This follow-up article from ProPublica discusses the attention that story gained in Congress and the subsequent efforts to now rein in the use of Roths as elaborate tax shelters for the wealthy.

Here's an excerpt:

"In its June 24 story, ProPublica detailed that one technique investors have used to sock hundreds of millions of dollars — even billions — away in their IRAs is to fill the accounts with bargain-basement shares in companies that are not publicly traded, so they have no clear valuation. Then, when the companies go public or are sold, their accounts explode in value — with all of the gains tax-free....

Thiel made an end run around the strict limit on what can be put into a Roth IRA by purchasing so-called founders’ shares of PayPal in 1999 when he was chairman and CEO of...

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Are Unemployment Benefits Taxable?

Article Highlights: 

  • CARES and COVID Tax Relief Acts
  • Unemployment Benefits
  • American Rescue Plan
  • Tax-Exempt Portion of Unemployment
  • Bogus Forms 1099-G
  • Kiddie Tax and Unemployment
  • States’ Taxation of Unemployment

With the passage of the CARES Act stimulus package early in 2020, the federal government began supplementing the normal state weekly unemployment benefits by adding $600 per week through the end of July 2020. When this provision ran out, and with Congress at a stalemate, President Trump issued an executive order in early August that extended the supplement, but at $400 per week, with the federal government providing $300 and the state the other $100. Then, the COVID Tax Relief Act that was enacted in late December of 2020 extended the federal unemployment supplement through March 14, 2021, but at $300 per week. Now, President Biden’s American Rescue Plan that Congress enacted in March of 2021 has extended the $300 benefit through September 9, 2021, and...

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7 Personal Finance Tips for Freelancers and Gig Workers

Freelance work and the gig economy have taken the nation by storm. A study commissioned by the Freelancers Union and freelance platform Upwork revealed that the gig economy’s work force reached an eye-popping 57 million Americans in 2019, with increasing numbers likely to join in the future. You can choose freelancing as your sole source of income or you can do it in your spare time for extra money, but whatever path you choose, you need to pay attention to how you’re managing your money — otherwise you’re liable to end up facing costly consequences. Here are seven personal finance tips that can benefit every person working as part of the freelance economy.

  1. Always start with a budget

Being your own boss is a common dream, but it isn’t easy. When you go out on your own as a freelancer or gig worker, you need to be able to gauge how much income you need in order to make it both worthwhile and feasible. To make that determination, you start with how...

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Do You Know About Roth IRA Conversions?

For those of you who’ve been following the ProPublica series on taxes and the wealthy class in America, you would have likely seen the article that dropped last week about Peter Thiel and his $5 billion Roth IRA.  You also probably thought, “how the heck can he do that?” 

In short, Thiel assigned a very low value to his shares of PayPal stock in the late 1990’s, placed them into a Roth at a total valuation under $2000, then watched as the company went public and was eventually acquired by eBay.  His IRA value exploded commensurately, and is now worth around $5B.  A debate could be had about whether this was an appropriate use of a Roth in the first place, but that’s for another discussion.

You might then ask, “what does this have to do with me, Manish?”  Well, the answer lies in another part of the article that discusses Roth IRA conversions.  Check out this excerpt from the article:

“[A Roth IRA...

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Add 5-6 Figures of After-Tax Cash Flow!

cash flow net worth taxes Jun 28, 2021

When most people think about their finances, they don’t even realize that TAXES are their biggest expense. Just do the math – when you add up federal, state, local, Social Security & Medicare TAXES, you’ll easily see what I mean.  

You’ll probably be shocked at how much of your income goes to TAXES. It’s likely you’re already forking over 30-50% of your income to TAXES.

And guess what? I’ve got more bad news for you… 

Your TAXES are going up! It’s not a matter of IF, but HOW MUCH and HOW SOON?

TAXES are only going to go higher, with this new administration, a soaring national debt and rising deficits, plus waves of retirees dropping out of the workforce over the next decade, not to mention the effects of the COVID-19 pandemic.

TAXES will HAVE to go up to pay the piper.

So, what if I offered you a way to add 5-6 figures of after-tax cash flow in the next 90 days, and add an additional zero to your net worth...

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Offensive Planning -- Tax & Retirement Planning Strategies


Offensive financial planning encompasses several key areas, including tax planning strategies, retirement income strategies, estate planning strategies, and investment and education planning.

Once you've built your financial foundation (see our videos on defensive financial planning), you can turn your attention to playing "offense" so to speak, and start building on that foundation.

Our Wealth.GPS system helps guide you through all of these stages of planning, and allows you to model various future-based scenarios to get a sense of how different planning strategies create different outcomes.

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Working from Home? Is there a Tax Deduction?

Article Highlights:  

  • COVID Work from Home Requirements
  • Employee Versus Self-employed
  • Qualifications
  • Actual Expense Method
  • Simplified Method
  • Home Office Expenses for Renters vs. Homeowners
  • How Moving Affects the Home-Office Deduction
  • Other Issues
  • Gross Income Limitation

Many individuals, because of the COVID pandemic, have been forced to work from home in order to curtail the spread of the virus. A frequent question is do they qualify for a special tax deduction for using their home as a workplace? 

The tax law includes  a deduction when you use part of your home for business; however, the bad news is the home office deduction for employees was suspended through 2025 by the Tax Cuts and Jobs Act (TCJA) that went into effect in 2018. So, currently employees cannot take a home office deduction.

Employees may want to discuss with their employers the possibility of being reimbursed for the costs associated with using the home for the benefit of the employer, such as a...

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Inflation is Already Here

economy inflation taxes Jun 16, 2021
Inflation is a hot topic again, hitting highs we haven't seen since 2008. The trillions of dollars printed last year by the Fed is certainly a large contributor to this, among other macro dynamics.
This Yahoo Finance article goes into some detail on this topic, showing high levels of inflation in certain areas of the economy, and not so much in others. It concludes that the effects are likely temporary.
But you have to keep a close eye on it, because it's the hidden tax that erodes the purchasing power of your dollars and steals your wealth. When the Fed expands the money supply, that's inflation -- the rising prices are the byproduct that often follows (but lags behind).
One way to counter this effect is to create additional after tax cash flow that you can put to work through your business and/or your investments. Drop us a line or call us today to discuss how we can help you achieve 5-6 figures of after tax cash flow savings!
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Tax Court Decision Holds Potential Impact for Travel Deductions

tax deductions taxes travel Jun 14, 2021

There are many professions that require taxpayers to travel extensively and spend significant amounts of time in paid lodging. These expenses are traditionally claimed as travel deductions. However, a case recently heard by the Tax CourtSoboyede, TC Summary Opinion 2021-3, 1/26/21 – has apparently established a new standard for what the IRS is to consider your tax home, and it’s not necessarily the same place that you think of as your primary residence.

The case centered on an attorney with his own law offices in both Minnesota and Washington, D.C.  In the tax year in question, 2015, he spent 54 days in Nigeria and spent the rest of his time working in one or the other of his offices. Multiple companies paid him $46,130 for document review work that year, with $38,548 attributed to work performed in Washington, D.C., where he either stayed in a hotel or an apartment for at least 161 days and incurred a total of $8,400 in travel expenses, which he deducted....

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Understanding Tax-Filing Status

Article Highlights:

  • Single
  • Married Filing Jointly
  • Surviving Spouse
  • Married to a Nonresident Alien
  • Head of Household
  • Married Filing Separate

Filing status is determined on the last day of the year and most often is based on marital status. The two most prevalent are as follows:

  • Single – Unmarried individuals without dependents.
  • Married Taxpayers Filing Jointly (MFJ) – The couple combines their incomes, deductions, and credits on a jointly filed return. They are jointly and separately liable for the tax determined on the return. Because filing status is based on the taxpayers’ marital status on December 31 of each year, this means that couples who marry during the year, regardless of the date of the marriage, are eligible to file MFJ (but a special rule applies for nonresident aliens – see below). Likewise, those who divorce during the year are not qualified to file MFJ for the year when the divorce is made final. A couple that is separated but still married...
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