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Financial Planning Tip June 2024

You may have heard of the backdoor Roth IRA. It's a method outlined here, whereby taxpayers who earn too much to contribute directly to a Roth IRA can still channel contributions to a Roth account via a two-step process. There's just one problem. The article linked above completely disregards a subsequent portion of the tax code that makes backdoor Roth contributions both taxable and complex (both topics discussed here) for those with any type of non-Roth IRA, including rollover, SEP, and SIMPLE IRAs. In other words, tax and investing advice found on the internet may be incomplete and inaccurate. Caveat emptor!

We read a lot of publications explaining tax and investment strategies for niche situations. These can be useful tools in limited cases. Too often the edge cases are picked up by someone in the financial press looking for something new to write about and they are more akin to clickbait rather than responsible tax advice. If you find a topic of interest, we're always happy to discuss these topics with our clients. A quick conversation with us or your tax advisor is much more pleasant than dismantling a tax trap.


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