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My Masters program was a law course. We studied countless Tax Court and Supreme Court cases. After reading the initial summary of facts, you'd see right away that the defendant was guilty or innocent, could or absolutely could not do whatever s/he did. Then you'd read the case and reasoning, including things like the "intent of congress" and "plain language" definitions and the ruling was opposite of what you'd expect. You sure realized how many moving parts there are to a simple code section. The biggest lesson I learned is that I have so much yet to learn. In anything tax related, we're best off sticking with the "it depends" response rather than jumping to any conclusion. We already do this when a client wants to know how much their return will cost before we've looked at the paperwork, or wants to know how much they'll owe or get back before we've entered a single number.

The seller always want to sell just the stock but the buyer wants to buy the equipment and goodwill so that they can get the depreciation/amortization. Also, buyer doesn't want the 'skeletons in the closet' of the old corporation, which is why we almost never see the sale of an entity.

Have a client who's been doing this every year for 4-5 years. It's bizarre to watch. I also hate it but a lot of people are switching from traditional IRAs into Roths, paying the tax and the reality is they would have avoided most or all the tax anyway if they withdrew from the trad IRA over 10-20 years. Had a 60 year old client who did this - she only had about $150k for retirement. When I told her she likely wouldn't have paid anything in tax (or very little) when she slowly withdrew in retirement she got mad at me - not the broker who did it to her.

Roth conversions are highly beneficial to taxpayers who expect to be in the 15% or higher Fed bracket after retirement AND who are in the 15% bracket at the current time. It's also very important that they be done before beginning to draw Social Security in most cases. There are interesting tax management strategies for someone who has sufficient income in retirement to enable them to balance regular IRA/401(k) withdrawals with Roth withdrawals to meet their living expenses with the smallest tax haircut. Roth conversions at the right time and in the right amounts also help these taxpayers to avoid unnecessary taxes due to MRD's if they are not needed for living expenses. But having said all that, I can only think of a few very special situations in which someone should convert ALL their qualified money to Roth. Any financial advisor or banker who gives that sort of advice is way out of line.

In addition to 9325, especially if you need a state acknowledgement I've gone to e file manager, check the return, then from drop down click on acknowledgement history. It will bring up SS#, accepted status, Submission ID#, Jurisdiction, form #, and date and time.

Great point. When people pose a tax question to me, I usually tell them that if a tax preparer answers with anything but "Well, it depends...", then the tax preparer probably misunderstood their question.

I have one who also just did this. He didn't ask my advice, just called and asked me why the bank kept insisting he decide whether he was withdrawing or recharacterizing. Me: "You are converting. It's a conversion. Can I run some numbers for you..." Client: "That's exactly right, it's a conversion. I have read everything there is to read on this. Thank you. No, I've got it figured out." Click. OK, you probably didn't read EVERYTHING there was to read... And using a bank for your investment broker is another thing you might reconsider...

Thank You to Catherine and every one else.

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KC....That is funny, but with small town gossip... I think they've been outed.

Yes, you are correct. I really don't even know how the program would know how to handle this. I think you'll have to dink around with it. But, I don't know, as I've never had this situation, and I have either learned a lot today or you should ignore me completely.

Yes, if I understand it correctly, and we're talking about a 2015 distribution, she's met the five-tax-year period that starts with the year the conversion was distributed from the regular IRA (2010). 2010, 2011, 2012, 2013, 2014 have passed. * I'm going to go on record as admitting that I may or may not understand it correctly, and why oh why won't people stop robbing their retirement accounts? Leave them alone. Please.

Interesting article for spare-time reading: http://www.forbes.com/sites/anthonynitti/2016/06/06/john-oliver-buys-and-forgives-15-million-in-medical-debt-but-is-the-forgiveness-taxable/?ss=taxes#7f89131929a6

I agree. I'm usually not in favor of increased regulation, but the financial advisor industry and their bank/financial services proxies should be held to a higher standard than they are. Any time a commission is involved, there's an incentive to give bad advice. 'It is difficult to get a man to understand something, when his salary depends on his not understanding it.' - Upton Sinclair

Why we shouldn't lieWe were dressed and ready to go out for a dinner and theater evening. We turned on a 'night light', turned on the answering machine, covered our pet parrot, and put the cat in the backyard.We phoned the local taxi company and requested a cab. The taxi arrived, and we opened the front door to leave the house.As we walked out the door, the cat we had put out in the yard scooted back into the house. We didn't want the cat shut in the house because she always tries to get at the parrot. My wife walked on out to the taxi, while I went back inside to get the cat. The cat ran upstairs, with me in hot pursuit. Waiting in the cab, my wife didn't want the driver to know that the house would be empty for the night, so she explained to the taxi driver that I would be out soon. "He's just going upstairs to say good-bye to my mother." A few minutes later, I got into the cab. "Sorry I took so long,” I said, as we drove away. "That stupid bitch was hiding under the bed and I had to poke her ass with a coat hanger to get her to come out. She tried to take off, so I grabbed her by the neck. Then, I had to wrap her in a blanket to keep her from scratching me. But it worked, so I hauled her downstairs and threw her out into the backyard. She'd better not shit in the vegetable garden again!" The silence in the taxi was deafening.

Also a great (silent) comment to her...

Mildred, the church gossip, and self-appointed monitor of the church's morals, kept sticking her nose into other people's business.Several members did not approve of her extra curricular activities, but feared her enough to maintain their silence.She made a mistake, however, when she accused George, a new member, of being an alcoholic after she saw his old pickup parked in front of the town's only bar one afternoon.She emphatically told George (and several others) that everyone seeing it there would know what he was doing. George, a man of few words, stared at her for a moment and just turned and walked away. He didn't explain, defend, or deny. He said nothing. Later that evening, George quietly parked his pickup in front of Mildred's house... walked home... and left it there all night. You gotta love George.

How many times have you seen clients after being informed of what they owe on their retirement distribution, take out more to pay the tax, so the problem occurs over multiple years?

"why oh why won't people stop robbing their retirement accounts? Leave them alone. Please." PLEASE! What do people think they are going to live on in retirement? We've all seen it time and again. Client takes $100k out of retirement account, then falls on the floor when we tell them how much they owe. "But I already paid the taxes!" Sure, you had a whole 10% withheld (which only covers the early withdrawal penalty) and NO state. And with the added income, 85% of your SS is taxable, and your Medicare contributions will go up too. On rare occasion a client will call BEFORE they take the distribution. When I tell them how much to withhold/put aside for taxes and they have to keep adjusting the withdrawal amount to arrive at the cash they need to buy a home, pay bills, whatever, it does give them pause. Yet they still do it. Combine this common practice with the number of people who give their homes and businesses to their children so they will qualify for Title 19 someday (while their kids live in luxury) and you can see what the future holds. There won't be enough people paying taxes to cover the nursing home costs of the purposefully destitute. Back to the days when nursing homes where people went to die. Ten or 12 in a room with one nurse, no activities, gross food, because the taxpayers won't be able to afford it. Repeat: PLEASE leave your retirement accounts alone.

Yes, but we are talking about the 10% penalty that applies to conversion amounts not left alone for five years or until age 59.5. They are subject to 10% penalty to discourage people from converting traditional IRAs and then taking out the conversions penalty free. Here's a good article: http://www.fool.com/money/allaboutiras/allaboutiras07.htm

David, on Form 5329, there is a worksheet for line 1. You can enter the amount subject to penalty on the worksheet. It'll say something like "2012 Roth distributions subject to tax on early distributions."

Are we talking about a 2015 withdrawal? You say "several years," [after the 2010 conversion] so I assume it's NOT a 2012 withdrawal that we are discussing. If it's a 2015 distribution of a 2010 conversion, the five year period beginning at conversion (not payment of tax - we don't care about that) has been met. She doesn't need to be 59.5 to avoid the 10% penalty on conversion amounts. There is not a penalty on withdrawn conversion amounts (just earnings) if the five year period has been met, regardless of her age. Earnings would be subject to the penalty if under 59.5, yes. I think I have that right... As to whether the program is treating it correctly, I'd just know what is correct and spank the program till it gets there.

Lots of that this year. Why oh why is right!

From pub 1345: If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the IRS, or if the IRS cannot accept the return for processing, the taxpayer must file a paper return. In order to timely file the return, the taxpayer must file the paper return by the later of the due date of the return or ten calendar days after the date the IRS gives notification that it rejected the electronic portion of the return or that the return cannot be accepted for processing. Taxpayers should include an explanation in the paper return as to why they are filing the return after the due date.

We have three clients that we mail the returns to them with her married name on them, then change her name to her maiden name and efile. We stopped asking....

Well, yeah, there's that. I have one who swears every year that she changed her name with SSA. I just nod and continue to use her old name.

Did you make sure that what you filed matched EXACTLY what is on her SS card? EXACTLY. "Client is sure..." is not good enough unless she is reading from the SS card. Been through this dozens of times and what the client is "sure of" very rarely matches the SS card.