Recent Developments

■ Roth Tax Tip:  A
common conversion approach is to divide your IRA into separate IRAs converting
each with investments in different asset classes. The ones that don’t
appreciate you re-convert to regular IRAs so you don’t have to pay income tax
on a unfavorable investment result.  Everyone
in your foursome converted their IRA to a Roth so you jump on the bandwagon.
Check out your State estimated tax payments. If you don’t pay in enough your
extension may not be valid. This can be tricky. If you made estimates assuming
some IRAs would be reconverted from Roth to regular IRAs, you could void your state
extension. Pay estimated state tax as if reconversion isn’t an option

■ Roth Drafting Tip:   If
you have a large Roth conversion consider amending your durable power of
attorney and will to authorize your fiduciaries (agent, executor) to reconvert
a Roth back to a regular IRA, or to convert a regular IRA to a Roth. Caution –
if the beneficiaries of the IRA (regular or Roth conversion) are different then
those receiving gifts under your power, or bequests under your will, clarify
how this should be addressed.

■ FICA Taxes: Severance payments
made by a bankrupt retailer to employees were not subject to Social Security
taxes. Quality Stores (D.C. Mich).
The IRS is likely to appeal this pro-taxpayer court ruling so the “jury is
still out.” However, it may be advisable for companies to file protective
refund claims on Form 843. The statute of limitations (the time period during
which a claim can be filed) for 2006 years is almost over (3 years after the
due date of tax return).  Severance
payments refunds may also be available for 2007 and 2008, and you will need to
take this new case into consideration for 2009. Thanks Julie Welch, CPA, CFP, of
Meara Welch Browne, P.C., Kansas City,
MO.