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Hi all,

DH and I got a call from the CPA last night who'd finished our taxes. We had two complex inheritances last year, so we figured a pro should handle it this year. Anyway, we were told that because we both have Roths, we are unable to file separately in the state of Ohio, even though this would save us 20% in federal taxes.

1) anyone else from Ohio who's ever heard of this one? I can't image how it would benefit anyone, from either end of the spectrum.

2) what kind of brown acid was Ohio's assembly on when they wrote this? Most arcane laws are years old and get contorted over the years, but obviously this can't be more than 5-6 years old.

3) has anyone with two Roths filed separately anyway, and if so, were there any repercussions?

Just curious...

LVK
-Looking for state reps' addresses since 1902
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DH and I got a call from the CPA last night who'd finished our taxes. We had two complex inheritances last year, so we figured a pro should handle it this year. Anyway, we were told that because we both have Roths, we are unable to file separately in the state of Ohio, even though this would save us 20% in federal taxes.

The rule is that you have to file your state return with the same status as you have on the federal return. You probably have to file jointly on your federal return to make the Roth contribution. You can decide not to make the Roth and see what the combined state and federal effect is each way, ie. both returns jointly or both separately.
That's assuming you haven't already filed your federal return.

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What kind of brown acid was Ohio's assembly on when they wrote this?

I feel your pain! I moved from Ohio about 12 years ago. My wife used to hide while I completed the Ohio income tax forms. She claimed I used words she never heard before, and her father was a Marine.

Unfortunately, I moved from Ohio to Virginia. Virginia's tax forms were easier to complete, but Virginia kept a bigger chunk of my income for their wealth redistribution programs. The good news was my wife would help me complete the tax forms. The bad news was her father talked to me about his daughter's language since she married me.

Now we live in New Mexico. I finally learned about the virtues of TurboTax, so I don't care about how difficult the tax forms are to complete, and after Virginia, the New Mexico tax bite seems moderate by comparison.

I've considered moving to one of the states without an income tax. However, Alaska is way too cold, and the other income tax-free states have other obnoxious taxes -- they get you one way or the other.

My other solution is to buy a small island in the Carribean someplace, and then declare war on the U.S. Of course the Marines will come down and kick my butt, but then the liberals in Congress will insist that the Department of State refurbish my island to the standard of living of the rest of the U.S. Unfortunately for me, this idea isn't original (Leonard Wibberly, The Mouse that Roared), and I'm afraid that declaring war on the U.S. this year will get me an all expense paid vacation to Cuba for the rest of my life.

I suppose I'm better of paying the taxes, and fuming about the Arbitrary Middle-Class Tax (aka AMT) and wealth redistribution.

David Jacobs
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DH and I got a call from the CPA last night who'd finished our taxes. We had two complex inheritances last year, so we figured a pro should handle it this year. Anyway, we were told that because we both have Roths, we are unable to file separately in the state of Ohio, even though this would save us 20% in federal taxes.

I think something's gotten garbled here. If you file your Federal return Married, Filing Separately, you cannot make a Roth IRA contribution if your AGI is above $10,000. I suspect that the MFS filing status would save you on your combined Federal and state tax, but at the cost of making the Roth contribution.

Your preparer should have advised you of your option to recharacterize the Roth contributions to nondeductible traditional IRA contributions. This would allow you to file MFS and save the 20%, but at the cost of the future savings from the Roth IRAs.

It's not a wonderful set of choices, but you do have a choice.

1) anyone else from Ohio who's ever heard of this one? I can't image how it would benefit anyone, from either end of the spectrum.

2) what kind of brown acid was Ohio's assembly on when they wrote this? Most arcane laws are years old and get contorted over the years, but obviously this can't be more than 5-6 years old.


I'm not from Ohio, but I've heard enough about this problem to understand it. You must use the same filing status on your Ohio return that you use on your Federal return. Because of the way the tax rates are structured in Ohio, a dual-income couple pays significantly more state income tax on a joint return than it does on separate returns. Thus, it is often to a working couple's advantage to file Married Filing Separately.

The problem is that Federal law places a lot of restrictions on the MFS return. Note that this is Federal law, not state. One of these restrictions is the inability to make Roth IRA contributions above $10,000 of income.

3) has anyone with two Roths filed separately anyway, and if so, were there any repercussions?

Don't you dare. You'd have excess contributions subject to the 6% penalty every year until you finally remove them. Bite the bullet and decide which you'd rather have: the Roth IRA contribution or the savings from the MFS returns.

Phil Marti
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[I think something's gotten garbled here. If you file your Federal return Married, Filing Separately, you cannot make a Roth IRA contribution if your AGI is above $10,000. I suspect that the MFS filing status would save you on your combined Federal and state tax, but at the cost of making the Roth contribution.]

Yep, you're right. DH took the first phone call, and he's not as money-minded as I am, so he may have not understood the whole deal. I called my parents last night, who have Block prepare their taxes, and it turns out they both have Roths and file separately anyway. That sounded odd, since my parents are the last people in the world to cheat on their taxes. I called the preparer back, and got the real story (i.e., that it's a fed law, not an Ohio law, etc.).

[Your preparer should have advised you of your option to recharacterize the Roth contributions to nondeductible traditional IRA contributions. This would allow you to file MFS and save the 20%, but at the cost of the future savings from the Roth IRAs.]

We were indeed so advised, but figured that would totally defeat the purpose of having a Roth in the first place. Since the Roth is so new anyway, I was floored by the AGI limit being SO low. Heck, even in 1997, or whenever it was started, what kind of income was $10K? I think airport panhandlers make more than that.

[3) has anyone with two Roths filed separately anyway, and if so, were there any repercussions?
Don't you dare. You'd have excess contributions subject to the 6% penalty every year until you finally remove them. Bite the bullet and decide which you'd rather have: the Roth IRA contribution or the savings from the MFS returns.]

I was never planning on it, just wondered if anyone had done it unknowingly (Since Block doesn't even seem to know about this!). The Roth is worth WAY more to us in the long run.

Thanks for the info!

-LVK
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