The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: IRA mistake||Date: 4/5/1999 10:56 PM|
|Author: TMFTaxes||Number: 13779 of 122521|
[[We opened an IRA (traditional) for my wife in August 1998 with a $2000
deposit, which we used to buy shares in The Gap. The $2000 has grown to
about $3328. ]]
[[ In the course of working with our CPA to prepare our tax return, our CPA
advised us that we cannot deduct the $2000 from our income because my wife
is contributing to a pension plan at work. So we should have set up a Roth IRA
back in August, because we don't get the advantage of a traditional IRA. (We
didn't set up a Roth IRA in the first place because when we ran the numbers
given my wife's age, etc. the traditional appeared better and we were not aware
of the pension plan problem.)]]
It's NOT JUST the pension plan issue that causes a problem...it's the pension plan issue AND your AGI. You can read more about this in the Taxes FAQ area. And your CPA should have explained it more to you.
[[ WE called Ameritrade to see if we could convert to a Roth. Basically they said
no. We'd have to sell the stock (I think that's what they said), withdraw the
money, pay the penalty for withdrawing the money, and even pay the capital
gains tax. If that is all true, we'll just leave it alone until my wife retires and start a
Roth IRA in 1999. ]]
I'm surprised. You SHOULD be able to "recharacterize" your original IRA to a Roth IRA (assuming that your AGI qualifies you for a Roth IRA). You should be able to tell your broker that this was a simple error, and transfer your existing IRA to a Roth IRA...effectively making your ORIGINAL deposit a Roth IRA deposit.
If the first person that you speak with at Ameritrade doesn't give you the right answer, you might want to climb the ladder. If they STILL give you an answer that you don't like, it might be time to find a new broker.
I KNOW that some others who post in this folder have done exactly the same think (recharacterize their tradional IRA to a Roth IRA), and were not required to sell stock, close the account, etc., etc. So I guess I'm surprised that Ameritrade gave you such a response.
You can read more about the Roth IRA in the Taxes FAQ area.
Want to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. It'll help you with your 1998 taxes, and it's never to early to start planning for your 1999 taxes. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
|Copyright 1996-2015 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|