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Tips of the Trade
Don't forget, beginning Jan. 1, 2010, Microsoft is discontinuing security updates for its Windows 2000 operating system. As a result, Scottrade will no longer be able to offer support for this operating system.
To determine which operating system you currently use, do the following:
1. Left click on the Start button in the lower left hand corner of the screen.
2. Left click on "Run".
3. Type in "winver".
4. Left click on "OK" to view a pop-up window displaying your current operating system.
Click here or contact your local branch office for more information.
Income Limit Lifted for Roth IRA Conversions
Beginning in 2010, investors may convert traditional individual retirement accounts (IRAs) to Roth IRAs regardless of modified adjusted gross income (MAGI). Previously, a MAGI limit of $100,000 had been in place.
The difference between a traditional IRA and a Roth IRA has to do with taxation. Traditional IRA contributions are taken pre-tax, and taxes are paid upon withdrawal in retirement. Contributions to traditional IRAs may be tax-deductible. Roth IRA contributions are taken after taxes, and the money grows tax-free.
Conversions from a traditional to a Roth IRA made in 2010 will not be taxed until 2011. The Internal Revenue Service (IRS) expects many Americans, particularly those in high income brackets, to take advantage of this opportunity and has granted a one-time option to pay only 50% of the taxes due in 2011 and the other 50% in 2012. This only applies to conversions made in 2010.
If you decide to divide your tax payments over two years, keep in mind that the rate at which you will be taxed is determined by your tax bracket each year. The taxes you pay in 2011 will be at your regular tax rate for 2011, and the taxes you pay in 2012 will be at your regular tax rate for 2012.
If you have any questions about converting your traditional IRA to a Roth IRA or the new IRS rules for conversions, please contact your local branch office.
Note to Wisconsin residents: The state of Wisconsin has not adopted this change. People from Wisconsin who make the conversion and who have modified adjusted gross income over $100,000 will be subject to certain Wisconsin penalties. Click here to read the details from the Wisconsin Department of Revenue Web site. If you have any questions, please contact your branch office.
This material is for informational purposes only and Scottrade is not responsible for any errors or omissions. The information is subject to change without notice and should not be construed as a recommendation or investment advice. Please consult your tax or legal advisor(s) for questions concerning your personal tax or financial situation.
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