back to indexBogleheads® on Investing Podcast 020 – Jeff Levine, CPA/CFP, host Rick Ferri (audio only)
Chapters
0:0 Introduction
0:38 Rick Ferri introduction
1:34 Jeff Levine introduction
8:40 CARES Act
10:50 Recovery Rebate
12:53 Recovery Rebate Strategy
14:21 Pulling Back Recovery Rebate
16:1 RMDs for 2020
17:30 How to fix an unwanted RMD
19:2 Can you stop taking an RMD
21:4 Unemployment
25:0 Can both spouses collect unemployment
25:50 State unemployment insurance
26:29 Rental property
28:41 Forbearance
29:29 Payroll Tax
31:44 Tax Filing Deadline
33:16 Quarterly Estimated Taxes
34:12 Paycheck Protection Program
35:43 Secure Act Highlights
39:1 Stretching IRA
41:41 Charitable remainder trust
44:13 RMD deferral
46:8 Roth conversions
46:55 IRA distributions
48:3 Tax loss harvesting
49:18 Substantially identical
52:25 My interpretation
00:00:11.320 |
Welcome to Bogleheads on Investing podcast number 20. 00:00:15.120 |
Today, I am happy to have Jeff Levine, a tax expert and a financial advisor, and we'll 00:00:24.080 |
be talking about the CARES Act, the SECURE Act, and tax loss harvesting. 00:00:39.560 |
Hi everyone, my name is Rick Ferry and I'm the host of Bogleheads on Investing. 00:00:45.040 |
This episode, as with all episodes, is sponsored by the John C. Bogle Center for Financial 00:00:59.120 |
Jeff is a certified public accountant, a certified financial planner, and a nationally recognized 00:01:04.560 |
thought leader on tax issues within the financial planning community. 00:01:08.920 |
Jeff is the lead financial planner nerd for Kitsis.com, home of the popular Nerd's iView 00:01:14.320 |
blog, and the founder of Fully Vested Advice Incorporated, which provides financial education 00:01:19.820 |
and consulting services to industry professionals. 00:01:22.920 |
He is also the director of advanced planning at Buckingham Strategic Wealth. 00:01:28.360 |
With no further ado, I am very happy to have on our show Jeff Levine. 00:01:38.080 |
Jeff, you're a great resource for everything that's been going on with various legislation 00:01:45.480 |
and taxes, and you are a bona fide tax geek, and we're really pleased to have you on the 00:01:54.160 |
Before we get into the nitty gritty details, could you tell us how you became a tax geek? 00:02:00.160 |
You know, I kind of by accident, probably like most people who end up in that. 00:02:04.000 |
I don't think anybody grows up and like, "Man, I want to be nose deep in the tax code every 00:02:13.720 |
When I was younger, my parents got divorced and my mom started looking for work, and as 00:02:18.760 |
it turns out, I had gone to school with Ed Slott, who probably many of your listeners 00:02:27.240 |
His sister-in-law had said to my mother, "You know, I think he's looking for an administrative 00:02:32.920 |
assistant, a secretary, something along those lines," and I was pretty young at the time. 00:02:38.360 |
But my mom ended up taking that job, and over the course of the years, she's actually become 00:02:42.360 |
the managing partner of the firm and has been for quite a while sometime. 00:02:46.760 |
For our listeners who don't know, Ed Slott is probably one of the nation's most respected 00:02:52.120 |
authorities on individual retirement accounts, and he gave you your first job and I guess 00:03:00.520 |
I mean, Ed Slott's father gave me my very first $100 bill after working a week on school 00:03:06.400 |
spring break, I think when I was like 13 or 14 years old. 00:03:10.000 |
And when everybody hears that story, and they also know that I worked for Ed Slott and Company 00:03:13.920 |
for about a decade, they just kind of think like, "Oh, of course, you were anointed from 00:03:22.880 |
And it couldn't have been further from the truth. 00:03:25.320 |
I actually wanted to be a doctor from the time I was two until 21, 22, my kind of senior 00:03:31.520 |
year in college, and I spoke with a lot of doctors in the emergency room, and I had been 00:03:38.600 |
doing EMS, and so I got very close with them. 00:03:41.920 |
And they all told me, "If you can find something else you love, go do that." 00:03:46.440 |
And so, here I am trying to take their advice, I say, "You know what, I've always loved math. 00:03:51.560 |
I enjoy working with people and helping people. 00:03:55.560 |
I've heard Ed talk about these people for years and how they can help people. 00:04:00.800 |
And so I started and I called up and asked around a bunch of people who I trusted. 00:04:04.760 |
They said, "Here's a good company to go to and do your training with." 00:04:08.720 |
So I called them up, and I got an invitation to come work with them. 00:04:13.480 |
And the first week we went in and it was, "Rah, rah, we're going to help people," and 00:04:18.560 |
Week two was an unbelievable motivational lecture, still probably the best motivational 00:04:25.160 |
For those listeners who are not familiar with it, it's called 212 Degrees, and the whole 00:04:29.240 |
concept was essentially water from 32 degrees on up to 211 degrees, goes from cold water 00:04:39.160 |
And you put in all this energy into the system, but by putting one extra degree of energy, 00:04:43.920 |
now you go from 211 degrees to 212, and you create steam and you power locomotives and 00:04:51.360 |
So I've always asked myself, whenever I'm not seeing the results that I think I want 00:04:59.120 |
Have I done so much work, but just not that one little extra bit? 00:05:04.320 |
And as a science nerd also, it really resonated with me and has still stuck with me to this 00:05:10.560 |
Then week three was all about life insurance, which was fine, you have to understand the 00:05:14.960 |
tools of the trade if you're going to be a financial planner. 00:05:18.080 |
But by week four it was, "Great, you're all experts, bring in a list of 100 people 00:05:22.600 |
you know and let's see how we can help them." 00:05:25.240 |
Which of course, Rick, as you know, was, "Let's see how many people you know that we can call 00:05:31.400 |
And I had this real crisis of conscience, I said, "What am I going to do? 00:05:37.400 |
How could I legitimately look somebody in the eye and say, "Trust me with your life 00:05:42.400 |
savings," when because of my unique relationship, knowing Ed Slott and the group of advisors 00:05:47.840 |
that he was training, I literally knew like 300 people who were way more qualified than 00:05:54.440 |
So I did something I almost never do, I quit and I said, "I'm sorry, this is not for 00:05:59.200 |
And I had no idea what I was going to do with my life. 00:06:01.160 |
At the time, I was actually thinking about going back to school for emergency disaster 00:06:06.800 |
Ultimately, I happened to go down and help my mother and Ed at a program they were having 00:06:12.320 |
purely for registration, they were just short on people, and was sharing the story I told 00:06:16.200 |
with you and an advisor at another table happened to hear me and said, "You know, I happened 00:06:22.480 |
to overhear you last night, I work in a CPA firm and we do all the planning for that firm, 00:06:27.280 |
so we don't have to like hunt down people, there's just plenty of people who need help 00:06:37.640 |
How would you like to come move down to Miami and work with us in the CPA firm?" 00:06:40.880 |
And so I went down to Miami and after about a year or so, it wasn't quite what I had 00:06:47.960 |
So to end this very long story and kind of to get to where we are today. 00:06:52.460 |
So Ed called me up into his office and said, "How would you like to work with us? 00:06:59.380 |
You seem to have an ability to grasp this stuff, how would you like to work with us?" 00:07:03.840 |
And when somebody who's the best in the country at something says, "Would you like to work 00:07:12.320 |
If they're the best garbage man in the country, I'm going to go work with them because I want 00:07:17.280 |
But I kind of took it as a challenge and went ahead and did that. 00:07:19.760 |
And they were almost 10 years of the best years of my life. 00:07:25.920 |
But as I ventured out and created my own RIA about three and a half years ago, that began 00:07:31.920 |
to take more of my time and I decided to ultimately, Ed and I parted ways very amicably. 00:07:38.520 |
So I went out on my own and shortly after that, Michael Kitsis, who I know you're familiar 00:07:43.640 |
with as well, he reached out to me and said, "Jeff, I don't know what you're planning 00:07:47.720 |
on doing, but would you like to do some stuff together?" 00:07:51.040 |
And again, when anybody who's a top in the country at anything, and I think Michael really 00:07:55.200 |
is the preeminent thought leader of our industry right now, when it says, "Would you like 00:08:03.600 |
I ultimately became the lead financial planning nerd, technically, is my title over at that 00:08:09.120 |
And then after about three years, the RIA had grown to the point where we really felt 00:08:14.000 |
for Michael and I to be aligned and for us to have some more scale on the advisory side. 00:08:19.000 |
So Michael and I both left our existing advisory firms to team up. 00:08:22.640 |
And so now I spend part of my time as the director of advanced planning over at Buckingham 00:08:28.200 |
Strategic Wealth and Buckingham Wealth Partners. 00:08:31.120 |
And in addition to that, I spend the rest of my time with Michael over on the Nerds 00:08:37.120 |
I wake up every morning and I'm excited to go to work. 00:08:43.440 |
So the most recent thing is the Corona's Aid Relief and Economic Security Act or CARES 00:08:50.920 |
Act, which is a $2 trillion emergency fiscal stimulus package. 00:08:57.800 |
And it's just loaded with all kinds of stuff. 00:08:59.780 |
So my first group of questions will be about the CARES Act. 00:09:03.760 |
And then we'll talk about the SECURE Act, which was signed into law late last year, 00:09:10.980 |
And then we'll talk about tax loss harvesting, which is something Boglehead have near and 00:09:16.740 |
So I want to get through those three big things today, and we're going to do it in 50 minutes 00:09:35.720 |
So I mean, I think the question that's on most people's mind is, what am I getting? 00:09:42.080 |
That seems to be the number one question people have asked so far is, am I getting a check? 00:09:49.360 |
Each adult taxpayer is entitled to a $1,200 recovery rebate check as a starting point. 00:09:57.640 |
Now I say as a starting point because we're going to have to adjust this for some higher 00:10:02.060 |
But as a starting point, $1,200 to adult taxpayers, single individual, $1,200, head of household, 00:10:10.540 |
let's give them $1,200, and a married couple who filed a joint return, $2,400 for two times 00:10:17.840 |
In addition to that, each taxpayer is also entitled to a $500 credit for each qualifying 00:10:25.500 |
And qualifying child here is the same way as a child tax credit is qualified for. 00:10:31.560 |
So we're looking for children under the age of 17 here, so 16 and under, and there's an 00:10:38.440 |
So for argument's sake, a married couple with a joint return who have three children would 00:10:44.800 |
be entitled as a starting point to a $3,900 recovery rebate check. 00:10:50.920 |
Are these checks actually going to be coming in the mail? 00:10:54.640 |
Are you getting a credit against your income taxes when you file your income tax? 00:11:00.400 |
So it is considered a credit against your 2020 taxes. 00:11:05.880 |
The easiest way I could think about explaining it is, imagine that the government is pretending 00:11:11.720 |
that everybody who's entitled to their rebate check paid that amount in for their 2020 taxes 00:11:18.440 |
already on January 1st of this year, and now they're just refunding it back to you. 00:11:23.600 |
They said, "Oops, you paid too much, here's your own money back." 00:11:26.920 |
That's the simplest way to think about this in one's mind. 00:11:30.240 |
Now in terms of how those checks are actually going to be processed, it's going to vary. 00:11:34.480 |
So for individuals who are receiving social security benefits, the likelihood is that 00:11:39.560 |
those checks will be processed, or those distributions will be processed to the account into which 00:11:44.120 |
they're getting their social security payment. 00:11:46.360 |
For individuals who have a direct deposit account on file with the IRS from either their 00:11:52.080 |
2018 or 2019 tax return, whichever is the most recent, then those direct deposit accounts 00:12:01.240 |
And then for all others, it will likely go to the address of record where you filed your 00:12:09.480 |
For instance, somebody who had a refund in 2018 that was processed, that might've been 00:12:15.040 |
over a year ago already, and what if they closed that account? 00:12:20.920 |
Or what if somebody moved from the last time they filed their tax return? 00:12:25.280 |
In that second instance, there is actually a remedy, something I would encourage your 00:12:28.760 |
listeners to do right now if they're thinking they may get a check, is go online, print 00:12:39.200 |
And what that is, it's just a simple change of address form with the IRS. 00:12:42.240 |
It says to the IRS, "Hey, you have my old address, use this one going forward." 00:12:48.280 |
And that would be a good way to make sure that your check, if it's going to be a check, 00:12:53.740 |
So this is a 2020 tax refund, but of course, you're not filing your tax returns until 2021. 00:13:01.020 |
Now, some people have already filed their 2019 taxes and some people have not yet. 00:13:06.580 |
So there must be some sort of a strategy here. 00:13:09.140 |
In other words, if your income for 2019 is lower than your income for 2018, you probably 00:13:16.180 |
want to file your tax returns, especially if you want to get it below the $150,000 for 00:13:21.420 |
married filing jointly, or less than that if you're single, correct? 00:13:27.060 |
And the reason that's important is, I think you just hit on it. 00:13:30.020 |
So we talked about a starting point before, right, for those checks. 00:13:33.660 |
But as income exceeds certain thresholds, notably, as you mentioned, for married couples 00:13:38.100 |
filing a joint return, $150,000; for single filers, $75,000; and for head of households, 00:13:47.060 |
Because your AGI for those applicable years, 2018 or 2019, exceeds those amounts, the recovery 00:13:54.500 |
rebate check that you get now, or recovery rebate direct deposit, whatever you want to 00:13:58.820 |
say, will be lowered by $5 for every $100 you're over those thresholds. 00:14:06.460 |
So as you mentioned, if your income is lower in 2019 than it was in 2018, it very well 00:14:12.140 |
may pay to file that 2019 return to get that on file with the IRS. 00:14:16.980 |
So they use that as the number to base this recovery rebate credit on. 00:14:21.980 |
What if it's the case where in 2018 that person didn't make that much money, but in 2019 they 00:14:29.220 |
made a lot of money, but they already filed their return? 00:14:34.380 |
Unfortunately, I don't see a way for you to pull back that. 00:14:43.260 |
But I was saying, boy, if this person did not file their 2019 return, they would have 00:14:54.300 |
But unfortunately, you're saying they can't pull it back. 00:14:57.780 |
Once that return is submitted and it's on file with the IRS, and the last thing you 00:15:02.420 |
want to do is do anything that is fraudulent on a tax return. 00:15:07.100 |
I've heard some people who said, "Oh, you know what I'm going to do? 00:15:10.260 |
I'm just going to report $1 of income for 2019 on a tax return. 00:15:15.340 |
This way I get my recovery rebate check, and then I'll just amend my return later." 00:15:19.700 |
That's still filing a return, and when you file your return, you're saying under penalties 00:15:25.380 |
of perjury that the information on there is true to the best of your knowledge. 00:15:29.400 |
And so that is not something you want to be doing right now. 00:15:32.980 |
If your return's on file, unfortunately, you should have procrastinated more. 00:15:39.020 |
Being a procrastinator really helped with the CARES Act in a lot of ways. 00:15:43.900 |
For instance, one, as you just mentioned, the other one is if you didn't take your 2019 00:15:48.180 |
RMD as a first-year person who has RMDs, in other words, you turned 70 and a half last 00:15:53.380 |
year in 2019, this year you can actually waive two of them. 00:15:58.260 |
They've rewarded procrastination in this law. 00:16:01.540 |
Well, let me ask a question about that because you hit upon it. 00:16:06.140 |
One of the other provisions of the CARES Act is if you're 72 and a half or if you're 00:16:12.880 |
70 and a half and you started taking required minimum distributions and therefore you would 00:16:17.840 |
have to continue taking them, that you can skip a year. 00:16:29.920 |
So first off, let's start with the easy answer is if you are a beneficiary, a non-spouse 00:16:35.720 |
beneficiary like you had a parent or grandparent who left you an IRA or a 401(k) and you took 00:16:40.220 |
that distribution, you are just SOL, as they say, right? 00:16:48.520 |
For owners of an account like an IRA owner or 401(k) owner, there's a couple of ways 00:16:55.680 |
The first and easiest way it could be fixed is if you happen to be within the 60-day window, 00:17:01.400 |
which essentially means at this point you took your distribution from, you know, beginning 00:17:08.320 |
If that's the case, then if you're within the 60-day window and you're not violating 00:17:12.960 |
the once-per-year rollover rule, which means if it's coming from an IRA, you haven't done 00:17:17.080 |
an IRA to IRA 60-day rollover within the past 365 days, then you can simply roll your distribution 00:17:25.480 |
Normally, you can't roll over an RMD, but this isn't an RMD. 00:17:33.160 |
I can actually say, oh, no, no, this was not my RMD. 00:17:37.720 |
I can put it back into the account within 60 days, and then I'm good. 00:17:45.000 |
There is a more complicated way for those who may be outside that 60-day rollover window, 00:17:51.000 |
and that's by using a separate provision of this CARES Act, which created what's called 00:17:55.840 |
a coronavirus distribution, and we can kind of get into the details of that later, but 00:18:01.200 |
one of the key points of a coronavirus distribution is that you have up until three years after 00:18:11.580 |
So you have to qualify for a coronavirus distribution, which essentially means you or someone you 00:18:17.800 |
know, either you or someone that's a member of your household, a dependent, your spouse, 00:18:23.200 |
contracted the coronavirus, or you had some sort of financial hardship because of it related 00:18:31.960 |
So you were furloughed, you lost hours, business closed, something along those lines, and I 00:18:37.120 |
think the way it's written, I think IRS means for this to be interpreted fairly liberally, 00:18:42.800 |
and if you can kind of force that distribution into this coronavirus-related distribution 00:18:48.680 |
box, if you will, then again, you have three years from the date you took that distribution 00:18:54.840 |
So those are two ways you could potentially fix an unwanted "RMD" that is no longer really 00:19:02.480 |
Okay, let me ask one last question about this and we'll move on to the next thing. 00:19:05.880 |
That is that I have a lot of clients who take an RMD monthly. 00:19:10.900 |
So they started taking it in January, they took it in February, they took it the beginning 00:19:18.240 |
Can they stop, or do they have to take their full distribution? 00:19:21.280 |
In other words, once you begin to take it for the year, do you have to take the whole 00:19:27.720 |
You absolutely do not have to continue taking it. 00:19:31.840 |
And here's the thing, normally there's, well, not normally, but there is this once-per-year 00:19:38.560 |
There may be ways to help resolve that for individuals. 00:19:44.600 |
One is if this distribution came from a plan, and let's say you took a February 15th RMD 00:19:51.640 |
and a March 15th RMD, and you're listening to this today, and whatever today is as you're 00:19:58.400 |
listening to it, you're within 60 days from both of those distributions. 00:20:02.440 |
If they came from a plan, like a 401(k), they can actually both go back to an IRA. 00:20:07.640 |
The once-per-year rollover rule doesn't apply to plan to IRA distributions. 00:20:13.280 |
The second thing would be, let's say this did come from an IRA, which is very likely 00:20:17.160 |
because a lot of people end up rolling over their dollars to IRAs later on for more flexibility 00:20:22.700 |
in terms of investments, et cetera, more control. 00:20:25.000 |
If it is the case that those February 15th and March 15th distributions already occurred, 00:20:31.200 |
and let's just say hypothetically today is April 3rd, we're still within 60 days, then 00:20:35.960 |
one of those distributions could go back into the IRA you took it from, or another one. 00:20:41.560 |
The other one you could convert, because an IRA to a Roth IRA conversion, like via a 60-day 00:20:48.680 |
rollover from the IRA to the Roth IRA, is also not considered part of the once-per-year 00:20:57.560 |
So yes, it still means it's taxable, but now at least it's growing tax-free in a Roth IRA. 00:21:02.000 |
So there's another way to potentially go about that. 00:21:04.400 |
>>COREY: Let's talk about the unemployment aspect of it, and something that's pretty 00:21:07.700 |
interesting, besides going in and getting basic unemployment benefits if you get laid 00:21:12.880 |
off or furloughed, or you're out of work because of this, is a couple of interesting things 00:21:20.280 |
I'll say them both here, but number one is you're eligible for it if you're self-employed, 00:21:26.880 |
and secondly, everybody gets an extra $600 per week. 00:21:32.280 |
So why don't you tackle the $600 one first, and then talk about the unemployment benefit 00:21:36.980 |
for self-employed people, which normally you don't get? 00:21:43.720 |
So in terms of the extra $600, first off, I would say when it comes to unemployment 00:21:49.280 |
as a general rule of thumb with this bill, just think it's bigger, it's longer, and more 00:21:59.520 |
With that said, the unemployment of $600, really what they were looking for is like, 00:22:04.240 |
"Hey, we've got to replace more of someone's regular income," because believe it or not, 00:22:09.640 |
the average unemployment today across the nation, and unemployment, I should mention, 00:22:15.960 |
Unemployment is not a federal benefit that is typically offered. 00:22:19.000 |
It's a state benefit that now the federal government is going to help fulfill and to 00:22:23.920 |
backstop in terms of the finances of it, but each state has its own unemployment rules 00:22:29.280 |
and time frame for how long they may last and amount of money, but the average unemployment 00:22:34.840 |
across the US is only about $385, so less than $400. 00:22:44.160 |
That's not going to be enough to support most families getting through this tough time. 00:22:48.040 |
So by adding the $600, now we're up to $1,000 a week, a meaningful amount that, again, at 00:22:54.600 |
least has the ability to help make sure that most people can pay the immediate bills that 00:22:59.440 |
they need to pay in order to continue to exist during this really unprecedented time. 00:23:04.640 |
Notably, that $600 plus the $400, so let's call it $1,000 for roughly the average payment 00:23:10.960 |
that someone would receive under these unemployment provisions, is more than what some people 00:23:18.200 |
And so that was one of the holdups, very temporarily, albeit, but there was a temporary holdup because 00:23:24.560 |
there was some debate in the Senate as to, is this right? 00:23:27.960 |
Should we actually incentivize people to collect unemployment and make more money rather than 00:23:34.600 |
And ultimately they came to the decision that it would be too challenging to do this separately, 00:23:39.800 |
one-off for each state, because again, each state has different programs, and that may 00:23:44.160 |
ultimately be the result of what happens, but it'll be a small percentage of people, 00:23:48.480 |
and of those it applies to, only a small percentage will likely take advantage of the system that 00:23:54.320 |
Now, with regard to the second part of the question, or really the first part, but kind 00:23:57.400 |
of circling back to that first part about self-employed individuals, you're right, because 00:24:01.520 |
unemployment means like, you typically don't get an unemployment unless you've been fired 00:24:05.680 |
or let go, and you can't do that to yourself if you're, I mean, otherwise, any time a self-employed 00:24:10.520 |
person wasn't having a good run of it, they would just say, you know what, I fired myself, 00:24:18.040 |
However, in disasters, we very frequently see legislation coming about that creates 00:24:25.200 |
an unemployment fund for individuals who are self-employed, because they are also impacted, 00:24:34.080 |
So there's a special provision of this law called Pandemic Unemployment Assistance. 00:24:40.040 |
And Pandemic Unemployment Assistance is basically a catch-all provision that says, if you don't 00:24:45.240 |
qualify for unemployment compensation for some other reason, i.e. maybe you're self-employed, 00:24:51.560 |
then you will get an equivalent unemployment compensation check via this Pandemic Unemployment 00:25:03.120 |
If it's a couple and both spouses are unemployed now, and one of them may have been self-employed 00:25:10.720 |
and have lost business, and the other one was employed and lost their job, they both 00:25:16.280 |
can collect unemployment and they both can collect the $600? 00:25:26.520 |
But I would say that the other thing to keep in mind is you always want to know what your 00:25:30.920 |
state laws are for unemployment assistance, unemployment compensation, because at the 00:25:36.360 |
heart of it, there's a lot of state law that goes into this. 00:25:40.120 |
Now, certainly if you didn't collect unemployment because of state law, you should be able to 00:25:44.960 |
potentially qualify for that same Pandemic Unemployment Assistance program that we had 00:25:52.200 |
If I'm self-employed, am I only going to get the $600 that the federal government is giving 00:25:59.880 |
Or am I also going to qualify for state unemployment insurance, which I normally wouldn't get? 00:26:04.880 |
So you will ultimately qualify for what amounts to your state plus the federal $600. 00:26:11.680 |
But it may all ultimately be administered to you via this federal Pandemic Unemployment 00:26:20.360 |
The state is not creating an unemployment compensation fund for self-employed individuals, 00:26:24.800 |
but the net result to someone is the same as if they would have gotten a state check 00:26:29.720 |
Let me ask an investment question, because this has been asked to me already a couple 00:26:34.920 |
Part of the provision of the CARES Act is someone who is paying rent can stop paying 00:26:41.800 |
rent, and I don't know under what circumstances they can stop paying rent, and they will not 00:26:49.520 |
And since the courts are basically closed, even if you wanted to evict them as a landlord, 00:26:55.200 |
Now, you could talk about that, but since this is an investment show, I'm going to look 00:27:00.960 |
The other side of that is a lot of people own rental property. 00:27:05.160 |
They own a house, they own a couple of apartments, they own some condos or whatever, and they 00:27:10.480 |
Now, I've already run into two people who their renter has said, "I'm not paying you," 00:27:23.160 |
Because they still have to pay their mortgage on that property. 00:27:26.720 |
Absolutely, and the first thing I would make sure to caution listeners is that we'll mention 00:27:32.640 |
here what's going on in the CARES Act, but it's always important to check your local 00:27:37.400 |
laws and see what's happened there as well, because property issues are often a matter 00:27:42.120 |
of state law, and governors, et cetera, may have instituted certain emergency regulations 00:27:47.540 |
that may supplement what we're about to talk about here. 00:27:50.840 |
But in particular, what the CARES Act does is it says that if an individual has a federally 00:27:57.920 |
backed loan, and there's a forbearance there, so if you're pausing that essentially, then 00:28:04.760 |
there can be a pause, if you will, of the renter as well, paying that rent to the individual 00:28:11.760 |
In addition, there's also some rules in there that prevent individuals from what they call 00:28:16.920 |
covered dwellings, which means that you're getting help some way, shape, or form from 00:28:22.480 |
So either you participate in any number of programs that are organized for housing, or 00:28:27.480 |
you've got a federally backed mortgage on the property, either as a loan or as a multifamily 00:28:32.920 |
loan, then there's going to be certain restrictions on you being able to evict tenants, even if 00:28:38.360 |
they're not paying their rent at this point in time. 00:28:41.740 |
If your renters stop paying rent because they lose their jobs, and you have a loan that 00:28:48.700 |
is backed by some federal program, and you're the landlord, you could go to your lender 00:28:57.140 |
So in other words, you could ask for leniency in delaying your own mortgage on that property. 00:29:04.820 |
Many states have already done that as kind of a proactive measure, too. 00:29:09.500 |
They've just said there is a general moratorium on rent payments, all you have to do is call 00:29:17.260 |
So it's really worth checking out the rules where you are locally here, because again, 00:29:22.620 |
this issue is so intertwined between state rules and the federal rules that we now have 00:29:30.300 |
The last item on the CARES Act that I'd like to address is the payroll tax, and there's 00:29:39.420 |
There is one available credit that is for certain businesses who have really struggled. 00:29:46.580 |
Either parts of their business or all of their business has been essentially shut down by 00:29:51.180 |
government order of one sort or another, or they've seen revenues from their business 00:29:57.220 |
drop by more than 50% from the same quarter in the previous year. 00:30:02.680 |
So for argument's sake, in Q2 of 2019, they had $100,000. 00:30:07.380 |
They would have to have below $50,000 in Q2 2020 for that to kick on and for that credit 00:30:15.780 |
But look, a lot of businesses are having a tough time right now, and many of them have 00:30:22.020 |
So they would be eligible for a credit of up to 50% times the W-2 wages that they're 00:30:29.140 |
paying to each employee, up to a maximum of $10,000 per employee. 00:30:38.860 |
So people need to make sure that this doesn't, you know, they don't conflate this with income 00:30:42.980 |
This just applies to the employment taxes, so things like FICA, et cetera. 00:30:48.860 |
Now, for anybody who doesn't qualify for that credit, or even those that do but still, let's 00:30:53.420 |
say, owe a tax in addition to it, there is another provision of the CARES Act that says 00:30:58.820 |
the payroll taxes, again, the employment taxes that you owe from now through the end of the 00:31:06.620 |
year, you can delay those for a significant period of time. 00:31:12.460 |
Half of them can be delayed up until December 31st of 2021, so we're looking at almost two 00:31:20.260 |
And the other half can be deferred up until as late as December 31st, 2022. 00:31:29.940 |
Now, it doesn't get rid of the liability for those companies. 00:31:32.300 |
In other words, that's a tax you're still going to have to pay. 00:31:34.940 |
But from a liquidity point, like if you need money now, that's a nice way to help reduce 00:31:41.040 |
your current expenses on your cash flow statement. 00:31:44.260 |
Okay, this is the absolute last two questions on the CARES Act. 00:31:52.500 |
And if I'm self-employed, do I have to pay estimated taxes? 00:31:58.340 |
So as it stands now, we've seen a couple bits of IRS information and guidance, and frankly, 00:32:03.340 |
I wouldn't blame any of your listeners if they were confused. 00:32:06.080 |
It's been so piecemeal over the last couple of weeks. 00:32:08.780 |
There's been kind of conflicting guidance out there simply because they put out one 00:32:12.640 |
thing today and two days later, they change it. 00:32:15.420 |
As it stands now, as we're recording this, the tax filing deadline for individual taxpayers 00:32:27.700 |
And that is also the payment date for taxes, so July 15th, 2020, for both of those items. 00:32:33.620 |
Two things I would note, though, for listeners. 00:32:36.140 |
One is that your business returns, if you didn't do that, let's say you had a S Corporation 00:32:41.100 |
or a partnership return, as of now, they were still scheduled to be submitted on March 15th 00:32:50.200 |
So if you haven't filed an extension yet, I would encourage you to do so immediately. 00:32:54.160 |
The other thing I would point out here is that a question that has come very frequently 00:32:58.040 |
to me so far since this guidance was released was, does this mean now that the extension 00:33:03.080 |
for a tax return is January 15th next year, in other words, six months from the July 15th 00:33:11.680 |
The extended deadline continues to be October 15th of 2020. 00:33:21.400 |
So self-employed individuals, really anybody who has to pay employment tax, excuse me, 00:33:25.840 |
quarterly estimated taxes, their Q1 is due on July 15th at the same time the 2019 income 00:33:36.960 |
Now, interestingly, some of your listeners who've been paying estimates for many of years, 00:33:41.240 |
they probably are thinking to themselves, "But wait, what about Q2's estimate? 00:33:53.240 |
So this year, you'll be paying your Q2 estimate before you pay your Q1 estimate, but that's 00:33:58.840 |
Look, Rick, we need ... This is employment guarantee for people of my ill. 00:34:05.200 |
It's just always inventory when it comes to this stuff because the rules are just ... Simplification 00:34:13.160 |
If there's anything else you could add that's important about the CARES Act for most investors, 00:34:21.520 |
I would simply state that for those listeners who are business owners as well, and if you're 00:34:26.240 |
having a hard time, there are a variety of loan programs that you may be eligible for 00:34:31.320 |
through the Small Business Administration in particular. 00:34:34.320 |
So some of those, in particular what's called the Paycheck Protection Program, is something 00:34:39.480 |
I would highly encourage listeners to look at. 00:34:42.280 |
It is an opportunity to get up to a 10-year loan at a 4% interest rate, so very favorable 00:34:49.140 |
interest rate over that period of time, especially for a small business that is potentially struggling. 00:34:53.920 |
The loan will be 100% backed by the Small Business Administration. 00:34:58.080 |
And in particular, if the loan is used for certain items in the first eight weeks following 00:35:04.520 |
issuance of that loan, so things like payroll, etc., health insurance, benefits for employees, 00:35:12.360 |
that portion in the first eight weeks is entirely forgivable. 00:35:16.260 |
So it's as close to free money as one can get. 00:35:19.300 |
In fact, it's so good even if they forgive the loan as part of that process in those 00:35:23.800 |
first eight weeks for the specified expenses, then it's not even included in your income. 00:35:29.160 |
Normally discharging debt is included in taxable income. 00:35:33.520 |
So I would strongly encourage business owners to look at these things, in particular, again, 00:35:38.680 |
what's called the Paycheck Protection Program, PPP. 00:35:44.680 |
And unfortunately, I was just reading today that one of the states have stopped taking 00:35:48.000 |
applications because they've been overwhelmed, which I would understand why. 00:35:54.440 |
Then we need to get on to the SECURE Act, which happened back December. 00:36:00.000 |
Well, I think the biggest highlight for those who are savers and who have for many years 00:36:05.640 |
planned on leaving IRA, 401(k), 403(b), and other retirement assets to children, grandchildren, 00:36:12.600 |
etc., is that the stretch IRA has been eliminated for the majority of beneficiaries that are 00:36:21.060 |
In short, the previous law allowed individuals who are named on a beneficiary form to take 00:36:26.880 |
small distributions over the course of their lifetime. 00:36:30.120 |
And that meant, in general, you know, for even middle-aged individuals, fairly small 00:36:37.000 |
For argument's sake, a 40-year-old has an IRS-given 43.6-year life expectancy, meaning 00:36:44.080 |
that they would have to divide their account by 43.6 and take that as a requirement of 00:36:49.840 |
At age 40, you're talking about taking like 2.5% of the account. 00:36:56.780 |
So many individuals not only had small distributions for years, but in addition to that, they were 00:37:04.120 |
You know, you did better than 2.5% when you're only taking out 2.5%. 00:37:09.360 |
Now, the SECURE Act says, with the overwhelming—I should say, rather, with very few exceptions, 00:37:16.160 |
the overwhelming majority of beneficiaries that are not a spouse will now have to take 00:37:21.960 |
everything out of the inherited IRA, inherited 401(k), et cetera, within 10 years after 00:37:28.920 |
So really compressing the time over which those distributions must occur. 00:37:34.280 |
And just for your listeners' sake, they're probably wondering, "Well, Jeff, you said, 00:37:37.960 |
you know, a very limited number of beneficiaries, but what are they? 00:37:42.360 |
Well, it's a spouse, which we've already said. 00:37:44.840 |
It could also be a disabled individual, which is defined under law essentially as someone 00:37:49.040 |
who can't work at all, unable to engage in any substantially gainful activity is the 00:37:54.680 |
A chronically ill individual, so those are the individuals that typically can't do two 00:37:59.840 |
out of six, what are known as activities of daily living, so eating, bathing, going to 00:38:06.200 |
the bathroom, transferring, those sorts of things on their own. 00:38:10.640 |
The fourth group would be any individual who's not more than 10 years younger than the person 00:38:17.120 |
So if you leave it to a brother or a sister and they're, you know, three years younger, 00:38:20.600 |
they can stretch, but they aren't really getting that many more years since they were only 00:38:23.880 |
three or four years younger than you to start with. 00:38:26.540 |
And the last one, and the one that causes the most confusion is the decedent's minor 00:38:32.660 |
Now, note, Rick, I said the decedent's minor children, not minor children in general. 00:38:38.320 |
And that's been one of the confusing areas that I've seen since the law was passed, people 00:38:44.560 |
It's only if the person who died left it to their own minor children and they only get 00:38:50.960 |
that break of not having to take it out over 10 years until they reach age of majority. 00:38:55.880 |
Once they hit age of majority, the 10 years starts then and they have to take it out over 00:39:01.200 |
So I've been working with a lot of clients on trying to figure out how to stretch this 00:39:06.840 |
And one of the things I came up with was if you are a spouse or you're a couple, and let's 00:39:14.520 |
say you each had equal IRA but you really didn't need the required minimum distributions 00:39:21.400 |
on it to live because you had other money, that you might want to, in each of your IRA 00:39:27.680 |
accounts, you might want to name the children as the beneficiaries instead of the spouse 00:39:35.360 |
Therefore, if it's a husband and wife and a husband dies younger, which historically 00:39:42.080 |
has been the case, the children would get the husband's beneficiary in which they would 00:39:46.480 |
have 10 years to take the money over that 10 year period of time. 00:39:50.720 |
And then the wife lives another 10 years and then she dies and then the children get the 00:39:56.440 |
second half of it and they take that over another 10 years. 00:40:00.520 |
So actually you've been able to stretch it out over 20 years. 00:40:04.560 |
And one of the things that I would also say is people may run into pushback sometimes 00:40:09.320 |
if they look to do that now and say, maybe the spouse says, "Well, what if I need the 00:40:15.960 |
You can kind of have your cake and eat it too here. 00:40:19.040 |
You can name the spouse as the primary beneficiary, name the kids as contingent beneficiaries 00:40:25.200 |
and people should always have contingent beneficiaries on their beneficiary form. 00:40:29.040 |
And if at the time the first to die spouse passes away, the surviving spouse says, "You 00:40:35.080 |
know, I really don't need that money," then they can disclaim it. 00:40:38.560 |
In fact, they can disclaim a portion of it and whatever they disclaim is essentially 00:40:44.720 |
That money will then pass down to those kids who will get the 10 year window at that point. 00:40:49.320 |
But that's absolutely a great way to extend and artificially create a longer period of 00:40:58.380 |
Another way potentially to do that would be just to have more beneficiaries instead of 00:41:02.320 |
naming the kids directly for 50% each, let's say there were two kids. 00:41:07.960 |
If each of those two kids had two adult children of their own, so talking grandparents here 00:41:12.400 |
doing this for their children and adult grandchildren, maybe they decide to do 30% to each kid and 00:41:19.400 |
then 10% to each grandkid as an immediate way to pass assets simply to spread that income 00:41:28.240 |
In other words, if I can't make more years to spread it out over, I'll make more returns 00:41:32.600 |
to spread it out over to keep that tax bill low. 00:41:35.440 |
So a lot of different ways you can go to try and mitigate the impact of this secure act 00:41:41.560 |
One of the other things we discussed was if you have one child who is doing very well 00:41:47.760 |
financially making $500,000 a year and you had another one who decided to go into a non-profit 00:41:54.840 |
and is making a much, much, much lower amount and is in a much lower tax rate that you leave 00:42:01.680 |
other assets, after-tax assets to the one who is making half a million a year and you 00:42:08.400 |
leave the IRA retirement assets to the one who is only making $30,000 or $40,000 a year 00:42:17.240 |
So you could equal that out somehow, but that would keep more wealth in the family overall 00:42:26.600 |
That's another great way to go and certainly even for those who really want to force the 00:42:33.920 |
Let's say, "I really wanted my kids to stretch." 00:42:36.800 |
There's even a potential way to artificially recreate that potentially for some individuals 00:42:41.380 |
using what's called a charitable remainder trust, essentially leaving your IRA to a trust 00:42:46.800 |
where when the beneficiary of that trust dies, the rest goes to charity. 00:42:51.880 |
But during their lifetime, they can take an income stream from that trust and it can replicate 00:42:56.680 |
to a large degree for certain individuals the benefits of a stretch IRA. 00:43:02.680 |
Now obviously, there are some downsides to it as well that people need to be aware of. 00:43:07.760 |
For instance, if the beneficiary of that trust dies relatively young, a lot of those assets 00:43:12.960 |
could be "lost" to charity, which is not the worst thing in the world from an altruistic 00:43:18.320 |
standpoint but from protecting one's family might have some consequences. 00:43:22.600 |
So there's at times a need for generational planning. 00:43:25.920 |
But this is what I would encourage your audience to do and it's just simply to talk with a 00:43:32.080 |
Like if this is something that you've done your entire life and worked and built up a 00:43:36.160 |
million or $2 million or whatever it is that's a lot of money to you and you want it to go 00:43:40.160 |
to your kids or other individuals and you want it to be as tax-efficient as possible, 00:43:46.000 |
take a few moments, get a little bit of information, or read up. 00:43:53.360 |
I think I've probably written 100,000 words on the SECURE Act already on our Kitsis.com 00:44:02.120 |
Just make sure that you're looking at this because it's a big deal. 00:44:07.720 |
And the bigger your retirement account, the bigger the potential issue is and impact is 00:44:14.080 |
One more item on the SECURE Act is it pushes the required minimum distribution age out 00:44:25.560 |
That's precisely correct that we get a deferral of the required minimum distribution age. 00:44:30.760 |
Now, notably, those who turned 70 and a half last year were going to have to continue to 00:44:39.080 |
Of course, now the CARES Act, which we just discussed, kind of supersedes that. 00:44:42.880 |
And so now they don't have an RMD this year either. 00:44:46.120 |
If people want to know, you know, what does this actually mean to me? 00:44:51.320 |
If your birthday is January 1st to June 30th, so you're a first half of the year birthday, 00:44:56.960 |
then you start taking RMDs now under the SECURE Act's rules. 00:45:00.840 |
Two years later than you would have if the SECURE Act had not passed. 00:45:04.680 |
And if your birthday is in the second half of the year, then you push back your RMDs 00:45:09.920 |
one calendar year based on what it would have been had the SECURE Act not passed. 00:45:15.200 |
Now, I will make one other important note here because it comes up often. 00:45:18.760 |
And Rick, I know a lot of your listeners are very charitably inclined, and some of them 00:45:22.880 |
may look to use their IRA to make those so-called qualified charitable distributions where they 00:45:30.400 |
send certain money from their IRAs directly to charity. 00:45:33.320 |
It's a fantastic tax-efficient way of supporting the causes that you're passionate about. 00:45:41.080 |
That date did not get pushed back until the age 72 date along with the RMDs. 00:45:51.400 |
Now, obviously someone at 70 and a half doesn't have an RMD anymore. 00:45:56.000 |
But if you want to give to charity, that's still a very tax-efficient way to do it. 00:45:59.840 |
And you can still do it from your IRA at age 70 and a half. 00:46:03.520 |
Once you hit 72, then it will also begin to offset your RMD at that time as well. 00:46:09.680 |
And you can do Roth conversions between 70 and a half continued just like you would normally 00:46:18.880 |
And this year for anybody because there's no required minimum distribution. 00:46:21.720 |
Normally, as you know, you have to take that required minimum distribution first. 00:46:26.160 |
And then you can kind of convert anything above and beyond that if you want, which has 00:46:30.760 |
the effect of essentially pushing your income up first and then saying, "Well, if you want 00:46:34.200 |
more income above and beyond your RMD, sure, you can add that on." 00:46:38.160 |
This year, you don't have that to worry about. 00:46:40.440 |
So maybe that's the answer for some people is instead of taking their RMD as normal, 00:46:45.240 |
just convert it to a Roth and you're in the same tax situation as you normally would, 00:46:48.440 |
except now you've got a pile of money growing tax-free forever and ever for you and your 00:46:55.080 |
So, it seems to me that you're in a really unique situation if you're maybe 71 years 00:46:59.920 |
old where this year you don't have to make a required minimum distribution. 00:47:05.800 |
You could donate $100,000 of your IRA to charity and you wouldn't have to pay any taxes on 00:47:14.160 |
that distribution and then any other amount you could take out, you could put it into 00:47:21.200 |
I imagine that's true for if you're 75 or 76 years old. 00:47:25.760 |
You get to do – you have free reign essentially over your IRA this year. 00:47:29.600 |
You can decide how much to give via the QCD up to that $100,000 amount and at the same 00:47:34.320 |
time, you could do a Roth conversion and you could do it in any order. 00:47:37.760 |
You could do 10,000 Roth conversion today, a $5,000 QCD later this year. 00:47:42.960 |
As long as you're just limiting yourself to that $100,000 QCD amount at some time, 00:47:50.680 |
There's a lot of flexibility that's offered in this challenging time. 00:47:54.880 |
No one would choose to have the reason for these special rules apply but since they do, 00:48:00.840 |
we might as well use them to the best we can. 00:48:03.120 |
Let's talk about something that our Bogleheads talk about all the time on bogleheads.org 00:48:08.680 |
and I had a lot of questions about this when I announced that you were going to be my guest 00:48:12.880 |
and it has to do with tax laws harvesting and tax swapping into a similar security and 00:48:22.240 |
what does the IRS mean by substantially identical securities? 00:48:27.400 |
Boy, I wish I had a really clear cut like super knowledgeable answer that said, "You 00:48:34.320 |
know, back in 1982, the IRS put out notice da-da-da-da-da." 00:48:38.960 |
Unfortunately, this rule has been on the books for a long, long time and it is still 00:48:46.640 |
Frankly, I think we've seen a further complication of the wash sale rules in the age of ETFs 00:48:55.320 |
because in a world where you sell let's say Microsoft and you buy Google, you could find 00:49:02.960 |
a fairly similar company but there's enough different dynamics with like an individual 00:49:07.840 |
stock that you could make a pretty good argument for not substantially similar in most instances. 00:49:13.960 |
When it comes to an ETF for argument's sake, and I know many of us… 00:49:21.000 |
The IRS talks about substantially identical, you said substantially similar, which is actually 00:49:27.640 |
used in a different part of the tax law and I think that is part of the confusion by the 00:49:34.880 |
You're correct to point that out exactly, that it is substantially identical. 00:49:40.860 |
So I would say that the ETF issue that's risen up with a lot of people is, you know, 00:49:48.260 |
if I change my, you know, S&P 500 ETF for a S&P 100 ETF, is that substantially identical? 00:49:59.160 |
And there's really not a great answer because again, you'd say it's significantly different. 00:50:04.200 |
You're only having 100 companies versus, you know, versus 500 or roughly, right? 00:50:12.760 |
But that's, if you look at how they track one another and the correlation, they are 00:50:22.720 |
And so you could, the IRS, I could very easily see the IRS coming in and having that argument 00:50:30.480 |
to say like, look, you have a 98% correlation, just hypothetically, you know, speaking. 00:50:35.480 |
And how could you say that these aren't substantially identical? 00:50:38.080 |
98% correlation is basically the same correlation. 00:50:41.760 |
You're really essentially buying the same thing just with a different name on it. 00:50:46.640 |
And so my view tends to be a little bit more conservative here. 00:50:50.360 |
Of course, this goes against the whole wash sale principle, right? 00:50:53.720 |
Like a lot of times people, or the idea of what people are trying to do, the whole point 00:50:57.480 |
of what a lot of times people are trying to do here is to buy something that's really 00:51:02.360 |
close that does replicate the same sort of investment performance because you're getting 00:51:07.040 |
rid of something, but you may have wanted it in your portfolio, you're only selling 00:51:12.060 |
So you want to replicate it with something that would mirror it as closely as possible. 00:51:16.760 |
But by doing so, you may be subjecting yourself to a greater risk of having that loss disallowed 00:51:25.320 |
I will say this, it's better to give yourself more distance. 00:51:33.120 |
We're talking about a period of 30 days and I know right now is maybe not the best time 00:51:37.880 |
to talk about how much will things change in 30 days because my goodness, how they've 00:51:42.860 |
changed in the last 30 days from when we're recording this. 00:51:46.720 |
But in general, those things tend to, you know, tend to work themselves out. 00:51:50.880 |
I would just buy something that's clearly different and has a difference of doesn't 00:51:56.320 |
track very closely the index that you were holding before. 00:52:00.240 |
I'm a little bit more conservative on this than some of my colleagues. 00:52:04.880 |
Certainly going from company A, S&P 500 to company B, S&P 500, that's going to be substantially 00:52:12.840 |
I don't think there's any question about that. 00:52:14.200 |
But in terms of, let's say, going even from like equal weighted to cap weighted, the more 00:52:18.400 |
distance you put between yourself and the previous position you sold for this 30-day 00:52:25.240 |
I will be a little bit more liberal in my interpretation. 00:52:28.920 |
Now I'm not a CPA, but I am an investment person and I've studied indexes and I've studied 00:52:36.560 |
ETFs and I've studied index funds, so my interpretation is different. 00:52:42.060 |
If you have Vanguard issuing an ETF that is tracking the crisp total market index and 00:52:53.200 |
Vanguard is the issuer of that ETF and the market goes down 10% and you sell that Vanguard 00:53:00.360 |
total market ETF that is tracking this crisp total market index and you turn around and 00:53:07.640 |
you buy an iShare that is issued by a completely separate company, completely unrelated. 00:53:17.520 |
The index they follow is a completely separate total market index, which is the S&P total 00:53:25.840 |
market index and completely unrelated to the crisp index. 00:53:33.600 |
Yes, they are almost all the same securities. 00:53:37.720 |
That it's at the issuer level, it's not substantially identical. 00:53:47.760 |
In some cases, they both make almost identical cars. 00:53:51.260 |
But when you have two completely separate unrelated issuers that are tracking different 00:53:57.320 |
indexes, even though the indexes are very similar, they are not substantially identical. 00:54:01.860 |
That's my view as a guy who has studied indexes and studied index providers and indexing methodologies. 00:54:10.200 |
The methodologies of how the indexes are constructed are not substantially identical. 00:54:20.160 |
First off, if I was going to court and I had to argue this before the IRS, I'd certainly 00:54:25.100 |
make that argument and I'd also have you hired as an expert witness to explain why they're 00:54:30.920 |
So that's the first thing, is get your ducks in a row and have the right team. 00:54:35.520 |
But the other thing I would say is, I think part of this also comes down to just the practical 00:54:41.120 |
If you're selling a really small position and in your portfolio and you're looking to 00:54:46.320 |
claim a $2,000 or $3,000 loss, at the end of the day, if that got disallowed by the 00:54:52.680 |
IRS, it's not going to be the end of the world. 00:54:55.140 |
On the other hand, if you were selling a big position that you had purchased and we're 00:54:59.160 |
talking about the difference of being able to claim a $100,000 loss or something like 00:55:03.800 |
that, then maybe that's where you tend to be a little bit more ... And I agree, my position 00:55:12.040 |
But as someone who doesn't want to be on the other end of the IRS disallowing that and 00:55:17.800 |
popping the person's income up $100,000 and seeing Medicare Part D and Part D premiums 00:55:22.480 |
inflate and all the other nasty things that come along with it, I've grown a little bit 00:55:28.000 |
I will mention one other thing about the wash sale rule, which I don't often get a chance 00:55:32.800 |
So it's great to be chatting about this today. 00:55:35.120 |
And that's the number one thing that you should be most careful of if you're looking at wash 00:55:42.160 |
sales, is to avoid selling the position inside your taxable account and buying it back in 00:55:52.820 |
That is a really big no-no, because if you violate the wash sale rule in your taxable 00:55:58.000 |
account and you buy it back there, as you well know, Rick, you're just adding to your 00:56:04.520 |
So you're ultimately going to be able to benefit from your basis and the amount that you spent 00:56:10.120 |
on the various positions at some point or other, many years potentially in the future 00:56:14.400 |
when you ultimately sell, but it's not lost forever. 00:56:18.060 |
If you sell an investment in your taxable account and you buy it back in your IRA, that 00:56:26.880 |
There's a revenue ruling out on this, and a revenue ruling applies across the board 00:56:32.040 |
And I will say this, your listeners may be wondering how are they going to know? 00:56:37.240 |
And there's actually a great article, I don't remember whether it was the Wall Street Journal 00:56:40.520 |
or maybe the Washington Post when this came out, they interviewed one of the old IRS commissioners 00:56:45.320 |
and he said, "I have no idea how they'd ever even know that." 00:56:51.160 |
But it is the rule and you're supposed to follow the rule, not what they catch you breaking 00:56:58.000 |
If a spouse buys it and their IRA within that 30-day period, it is still a wash sale. 00:57:06.480 |
Jeff, is there anything else you want to talk about? 00:57:11.480 |
I would just encourage everyone at this point in time, this may be a challenging year for 00:57:18.440 |
If you've got savings put aside and you're living off that savings and your income is 00:57:22.880 |
down this year, this may be an opportune time to look at doing Roth conversions while your 00:57:30.320 |
And certainly I would just say that with the few moments we have left, I know this is a 00:57:37.360 |
I hope that something here was of value to you today and I certainly wish nothing but 00:57:44.360 |
the best of health and happiness for everyone listening. 00:57:46.880 |
And I really appreciate the opportunity to chat with you and your listeners today, Rick. 00:57:50.520 |
On behalf of the Bogleheads, we greatly appreciate you being on the show and hope to have you 00:58:00.200 |
This concludes the 20th episode of Bogleheads on investing. 00:58:06.600 |
Join us each month to hear a new special guest. 00:58:10.040 |
In the meantime, visit Bogleheads.org and the Bogleheads wiki, participate in the forum,