by Barry Steiner CPA (Former IRS agent)
Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.
6. Roll over into a Roth account
‘Roth’ versions of traditional retirement accounts, such as 401(k)s and IRAs, also provide a great tax savings opportunity. Although you don’t get a tax break when you put money into a Roth account, the money grows tax-free and is never taxed again. Rolling over your IRA into a Roth account now may make sense, since tax rates are low, and the value of many accounts has been artificially depressed. Paying tax on the rollover now could save money if tax rates go up and your account recovers. The AGI limit of $100,000 on these rollovers was recently lifted, so even high-income taxpayers can convert their IRA’s, but pay the tax now.
Your Weekly Tax Jokes
“Your taxes are due a week from today. You can make out your check directly to Halliburton. Or you can do what I’m going to do. I’m filing my first joint return. No, I’m not getting married, I’m sending the IRS an actual joint with a note that says, ‘If you think I’m paying for this war, you must be high.’” – Bill Maher
“It’s tax time and President Bush is saving a lot on taxes this year. He’s writing off his entire second term.” – David Letterman
“Vice President Dick Cheney’s getting a tax refund of $1.9 million. How do you get a $1.9 million refund when your salary is $205,000 a year? How does that work? … Apparently, he’s writing off the guns and ammo as business expenses.” – Jay Leno
“While [President Bush] was doing his taxes, under dependents he listed Scooter Libby, Tom DeLay, and Jack Abramoff. Then he caught himself, ‘Dependents? Oh, I thought it said defendants.”‘ – Jay Leno
Click here to see previous Tax Tips from Barry R. Steiner. Check back next Wednesday for another free tax tip – one tip for each week of the tax season until April 17th.
Barry R. Steiner is a Chicago-based CPA and former IRS Agent. He’s the author of the best-selling income tax guide “Pay Less Tax Legally” and was a regularly featured guest on ABC-TV’s “Good Morning America”. Barry has maintained his own tax practice for the past 40 years, and most recently has authored two e-books: “Infernal Residue” and “Kiss My IRS”. More info at KissMyIRS.com »