Going through the back door can pay off for high-income retirement savers.
We’re talking about the backdoor route into popular Roth individual retirement accounts, which offer tax-free income in later life.
The front door into Roths is shut for many investors. Married couples earning $191,000 or more and singles earning $129,000 or more in 2014 are barred from contributing directly to Roth IRAs.
But there’s a simple detour that works for many of them. They can put money into a traditional IRA—and then roll that into a Roth IRA, getting all the benefits.
The report, from the Treasury Inspector General for Tax Administration, pointed out that the IRS’s own employees and contract employees are required under the Internal Revenue Manual to pay any federal tax debts and file their taxes on time, but employees of IRS contractors are not held to the same standards.
TIGTA found that as of June 14, 2012, 691 of the 13,591 IRS contractor employees, or 5 percent, it reviewed had $5.4 million in federal tax debt. These debts were either agreed to by the taxpayers or affirmed by the court. Of the 691 contractor employees, 352 are not currently on a payment plan to resolve their tax debts.
Most of the contractor employees appeared to have been compliant when their initial staff-like access was granted, but at least 319 contractor employees had tax debts assessed after they were granted staff-like access,
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For more than a decade, Tim Quinn, CPA, CGMA, negotiated the tedious, back-and-forth magic of building the annual budget for Northern Quest Resort & Casino.
Every year, it was the same time-consuming endeavor: Quinn, the company’s vice president of finance, would send out budget worksheets to 45 department heads. The department heads would return them with inflated spending projections, or low-balled revenue projections, for the coming fiscal year. Quinn would question the validity of those projections. Pushback would ensue, but Quinn and his staff would prevail, often by adjusting the projections to something that more realistically reflected historical trends.
After several rounds of wrangling, voilà: The budget was born.