Plan and Prepare – April 11, 2012

As we near the tax filing deadline (4/17/12) for 2011 tax returns, our office is staying busy processing 2011 IRA and ROTH IRA contributions and dealing with other tax reporting issues. Tax-deferred strategies are gaining more publicity as we are on the eve of some extraordinary tax benefit expirations at the end of 2012. These benefits have collectively saved investors billions of dollars over the past decade. Howard Silverblatt, Senior Index Analyst at S&P Indices, reported that “individual investors will have saved $358 billion on qualified dividend tax cuts from 2003 through the 2012 expiration date.”

One nifty little tax-savings strategy which doesn’t get discussed much is the cleverly titled “Backdoor IRA”. This strategy typically benefits a very small number of people or the “tails” of the bell curve for our statistician friends. But you never know if you don’t ask and many people who could otherwise benefit from it, don’t know about it. As such, we have developed a handy tool to quickly assess whether the Backdoor IRA makes sense for you. We would be happy to discuss it with you in time for the tax deadline. Some high level screens for you to determine if this might make sense are a) can you contribute directly to a ROTH IRA and b) do you have high aggregate IRA balances and/or low or no basis in your IRA. If you answer yes to both of these questions, the strategy probably won’t work well for you. If you answer no, it makes sense to explore further to determine what the potential tax benefits are. Either way, we would be happy to discuss with you and run the tool to be certain.

Please contact us to learn more.

Enjoy the rest of tax season,

Patrick Rudy

Patrick Rudy CFP,^® CPA, AIF^® is a Senior Investment Consultant with Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.