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☆ Why your Roth IRA conversions could have 'unintended' tax consequences
▼ + stars: | 2024-10-02 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

As year-end approaches, you may be eyeing Roth individual retirement account conversions. The strategy, however, boosts your income, which can have other tax consequences, experts say. Roth conversions shift pretax or nondeductible IRA funds to a Roth IRA, which provides future tax-free growth. Otherwise, you could lose eligibility for certain tax breaks or unexpectedly trigger tax hikes. Here are a couple of other major tax issues to watch, experts say.

Persons: eyeing Roth, Roth, JoAnn May, Helene Organizations: Roth IRA, Asset Management, Finance, Social Locations: Riverside , Illinois

☆ This is the 'sweet spot' for Roth individual retirement account conversions, expert says
▼ + stars: | 2024-05-09 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

If you're weighing a Roth individual retirement account conversion, you could save on taxes by leveraging a limited window of time, experts say. Roth conversions transfer pretax or nondeductible IRA money to a Roth IRA, which kickstarts future tax-free growth. After you stop working, but before you start required withdrawals from retirement accounts, is "the sweet spot" for Roth conversions, according to JoAnn May, a Berwyn, Illinois-based certified financial planner at Forest Asset Management. Plus, many investors want to leverage lower income tax brackets through 2025 before provisions could sunset from former President Donald Trump's signature tax overhaul, she said. After a Roth conversion, you'll owe regular income taxes on the converted amount.

Persons: Roth, JoAnn May, IRAs —, Donald Trump's, you'll Organizations: Roth IRA, Asset Management, Finance Locations: Berwyn , Illinois

☆ Here's how to avoid getting 'hammered' on inherited individual retirement account taxes, experts say
▼ + stars: | 2024-05-06 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

Inherited individual retirement accounts can be a financial boost for heirs, but the windfall can trigger tax issues, experts say. Withdrawals from pretax inherited IRAs incur regular income taxes. Since 2020, certain heirs can no longer "stretch" retirement account distributions over their lifetime to reduce yearly taxes. Now, certain heirs, including most adult children, must deplete inherited accounts within 10 years, known as the "10-year rule." While only about 20% of May's clients have inherited IRAs, she expects more heirs to face the tax-planning issue as baby boomers age.

Persons: IRAs, Ed Slott, Roth, Slott, JoAnn May Organizations: Finance, IRS, Asset Management Locations: Berwyn , Illinois

☆ I'm a certified financial planner and tax reporter at CNBC. How I tackle my own retirement tax planning
▼ + stars: | 2024-03-04 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +3 min

Now, as a tax reporter for CNBC, I focus on tax strategy all year, including how retirement contribution decisions may affect long-term plans. Pretax vs. Roth retirement contributionsOne of the biggest questions from investors is whether to save money into a pretax or after-tax Roth account. Early in my career, I focused on Roth savings, which made sense with lower income and decades until retirement. I've prioritized my employer match with pretax and Roth 401(k) deferrals, while also making Roth individual retirement account contributions. There's also a small nest egg in my health savings account, which I added to during my years of self-employment.

Persons: Seksan, I've, Ashton Lawrence, Roth, you'll, pretax, There's, JoAnn May Organizations: CNBC, CFP, Mariner Wealth Advisors, Asset Management Locations: Greenville , South Carolina, Berwyn , Illinois

☆ This simple calculation will show if you’re withholding enough taxes from your paycheck
▼ + stars: | 2024-02-07 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

Witthaya Prasongsin | Moment | Getty ImagesIf your tax refund or bill is bigger than expected, it could be time to adjust your paycheck withholding — and a simple calculation could help, experts say. How paycheck withholdings workWhen you start a new job, you fill out Form W-4, which tells employers how much to withhold from each paycheck for federal income taxes. You calculate your effective tax rate by dividing your total tax (line 24) by taxable income (line 15). If your 2024 earnings are similar to 2023, you'll want your federal paycheck withholdings at roughly last year's effective tax rate, Loyd said. For example, if your gross paycheck is $1,000 and last year's effective tax rate was 12%, you'll want about $120 withheld in federal taxes, he said.

Persons: Witthaya, John Loyd, JoAnn May, —, Loyd, you'll Organizations: Forest Asset Management Locations: Fort Worth , Texas, Berwyn , Illinois

☆ This costly withholding mistake is 'always a surprise,' tax pro says
▼ + stars: | 2024-02-06 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

Guido Mieth | Stone | Getty ImagesAs millions of Americans start filing returns, experts warn that last year's tax withholding errors could trigger an unexpected bill. The IRS requires tax payments throughout the year and many workers do that via automatic employer paycheck withholdings. By contrast, you may see a tax bill if you didn't pay enough. For filers with multiple jobs, withholding issues are "always a surprise," according to certified financial planner JoAnn May, principal at Forest Asset Management in Berwyn, Illinois. If you didn't adjust your withholding to reflect your new single status, you may not pay enough taxes during the year.

Persons: Guido Mieth, JoAnn May, it's, you've, John Loyd Organizations: Asset Management Locations: Berwyn , Illinois, Fort Worth , Texas

☆ You can avoid paying surprise taxes by picking the best investment accounts. Here's how
▼ + stars: | 2023-02-20 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

If you're looking for ways to trim your yearly tax bill, experts may check your portfolio, since some assets are more likely to trigger taxes in certain accounts. Your 401(k) account offers tax-deferred growth, meaning you won't owe levies on yearly income, such as dividends and capital gains. By contrast, you may owe taxes for selling assets or receiving income in a brokerage account, which may be a surprise for some investors. If you have three types of accounts — brokerage, tax-deferred and tax-free — you can pick the best spot for each asset, said May, who is also a certified public accountant. Since bonds may have less growth but distribute income, they may be suitable for tax-deferred accounts like your 401(k) plan, she said, and investments most likely to appreciate may be ideal for tax-free accounts, like a Roth individual retirement account.

☆ Roth IRA conversion taxes may be trickier than you expect. Here's what to know before filing — or converting funds in 2023
▼ + stars: | 2023-01-22 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

For example, let's say you have a pretax IRA of $20,000 and you made a non-deductible IRA contribution of $6,000 in 2022. Of course, the bigger your pretax IRA balance, the higher percentage of the conversion will be taxable, May said. Alternatively, a larger non-deductible or Roth IRA balance reduces the percentage. But here's the kicker: Taxpayers also use the Form 8606 to report non-deductible IRA contributions every year to establish "basis" or your after-tax balance. Typically, he aims to "fill up a lower tax bracket," without bumping someone into the next one with Roth conversion income.

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