Issue link: https://viewer.e-digitaledition.com/i/111490
The Roth IRA Workaround by richard Weidrick, Cpa/pFS A r o t H i r a D i f f e r S f r om a traditional IR A in that contributions a re not deductible, f uture w ithdrawals are not ta xable and Roth IR As are not subject to minimum distribution requirements. These differences have made Roth IRAs popular since their inception. Despite their popularity, many people who see the value of the Roth find their ability to contribute to a Roth IRA is limited due to the amount of their taxable income. For Roth purposes, the adjusted gross income limits for 2012 are $183,000 for married individuals filing a joint return, $10,000 for married persons filing separately $10,000 and $125,000 for single taxpayers. So the question becomes��� ���How to get money into a Roth IRA when contributing directly to a Roth is not allowed?��� The solution���contribute money to an IRA and do not claim a tax deduction for the contribution. This nondeductible contribution can than be converted or added to a Roth IRA. Once added to the Roth, it grows tax free, future withdrawals are not taxed and the account is not subjected to the distribution rules. This workaround can be successful as long as all other retirement monies are held in non-IRA vehicles such as a 401k account or pension plan. If other IRAs besides the Roth are owned then the amount that can be converted to the Roth tax free must be prorated. For example, if total IRA accounts amount to $95,000, and $5,000 is contributed to nondeductible IRA and then converted to a Roth IRA, then 95% of the amount converted to Roth, or $4,750, is deemed to have come from existing IRAs and is therefore taxable. There may be other ways to sidestep the adjusted gross income limits and contribute money to your Roth depending on your circumstances. The Roth can be a powerful tool and, in this case, ���no��� does not necessarily mean ���no���. Rich Weidrick is a CPA and a principal of Weidrick Livesay & Company in Akron. ��� We've worked with physicians for so long, we'll give you a sandwich if you have borborygmus. For more than 30 years, Weidrick Livesay & Company has been serving the business and accounting needs of physicians, from wealth management and retirement planning to prescribing corned beef on rye for those pesky stomach rumblings. 2150 N. Cleveland-Massillon Rd. ��� Akron, OH 44333 330.659.5985 www.wlcpa .co m MarcH -april 2013 ��� MDneWS.coM ��� MD News Cleveland/Akron/Canton | 35