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how to undo spouses roth when getting married

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  • how to undo spouses roth when getting married

    Hi,

    I plan on getting married soon, but throughout the year my fiance has been putting money in her Roth IRA.  Once we get married, our combined income will surpass the Roth limits.  I use the backdoor roth option, but my fiance never needed to because her income was under the limits.  What do I do with her Roth contributions from this year if we get married before the end of 2017? Do we recharacterize/convert them into a non-deferred traditional IRA?  And will we then be able to backdoor them back into a Roth? Or will we have to wait a while before using it to backdoor? What about the minimal growth from the lots she has purchased this year (she was basically using the dollar cost averaging method, putting money into it each month)? She has no other traditional IRA space.

     

    Thanks,

    Billy

  • #2
    You will need to do one of two things:

    1. Ask the custodian to reclass the Roth contributions to TIRA contributions.

    2. If they can't do that, then the custodian will need to recharacterize the Roth contributions to TIRA contributions.


    She will not have to wait before converting to a Roth. When she does so, she will pay taxes at ordinary income tax rates on the growth in the nondeductible TIRA.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I thought you could still file single the year you get married, no? (Look that up to make sure it's allowed before doing it.) But chances are you'll have a lower tax bill to file married.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #4




        I thought you could still file single the year you get married, no? (Look that up to make sure it’s allowed before doing it.) But chances are you’ll have a lower tax bill to file married.
        Click to expand...


        No, you are required to file using your marital status as of the last day of the year (December 31, not April 15), whether you just got married or just got divorced. Funny how often that question comes up.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Just recharacterize the Roth contribution to a traditional, convert it to Roth, and don't deduct it on the taxes.  Idk from the top of my head if this makes your gains taxable or not, but the contribution won't be.  It's in either pub 590a or 590b.

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          • #6
            Thank you! Will try doing it next week.

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            • #7







              I thought you could still file single the year you get married, no? (Look that up to make sure it’s allowed before doing it.) But chances are you’ll have a lower tax bill to file married.
              Click to expand…


              No, you are required to file using your marital status as of the last day of the year (December 31, not April 15), whether you just got married or just got divorced. Funny how often that question comes up.
              Click to expand...


              I think I was thinking of the year a spouse dies. Then you get to choose whether to file married or single, no?
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #8










                I thought you could still file single the year you get married, no? (Look that up to make sure it’s allowed before doing it.) But chances are you’ll have a lower tax bill to file married.
                Click to expand…


                No, you are required to file using your marital status as of the last day of the year (December 31, not April 15), whether you just got married or just got divorced. Funny how often that question comes up.
                Click to expand…


                I think I was thinking of the year a spouse dies. Then you get to choose whether to file married or single, no?
                Click to expand...


                Yes, that is correct.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  how do you do your taxes?  if you use turbo tax, it can be confusing to enter the recharacterization correctly.  we had this issue last year where we ended up making too much money after the roth contribution was already made.  it took many calls to turbo tax and internet searching to be able to figure out how to do it (=many hours of frustration).  if you use turbo tax, you will need to enter it a special way....

                   

                  https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html

                   

                  if you need help at tax time, let me know, i took some detailed notes because even the tutorial is a little confusing...

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                  • #10
                    You could also move the wedding to 1/1/18.

                    Just saying. (terrible idea, but technically it'd solve the problem too)

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                    • #11
                      Called vanguard, they are walking us through it very easily.  Even asked if we are going to use this to backdoor roth, so we're on the same page.

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