Reply to Bill proposed to crack down on backdoor roth (and other loopholes)

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]BTW, actual text of bill is available:  https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me.  I'll just wait to see what (if  anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022.  If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.[/quote]

[b]How are taxes handled on the forced withdrawals from mega Roth IRAs? [/b] I couldn’t find that in the bill.[/quote]

Why would there be taxes?  It's a Roth IRA.[/quote]

If you withdraw any profits from a Roth IRA before you turn 59 then you owe taxes today, but in the event of a forced withdrawal, I'm pretty sure it would have to be made tax free for everybody.  Otherwise you'd have an awkward cliff and terrible optics ie. Warren Buffet and Mitt Romney withdrew tax free but somebody who had just turned 58 had to pay 40-50% tax on their withdrawal.  Not to mention other issues of basic proportionality and fairness.  It's really Congress' fault for creating the Roth loopholes in the first place.[/quote]

I think you are asking about the proposed required distributions if your roth is very large, over $10M?  This proposal states this only applies if your income is &gt; $400/450k, BTW.

I can't make sense of the actual bill text to answer that question for you.  I'd be a bit surprised if they allowed it to come out tax-free, but I also see your point about age not really being the main point, espeically at balances of $10M+. [/quote]

But Peter Theil would owe taxes on nearly $5B.  I can't imaging they let that skate away.[/quote]

That would fundamentally change the Roth IRA account. They appear to be making these excess funds required minimum distributions which would be at whatever tax rate applied for that type of distribution(I.e. no taxes for Roth IRA distribution)[/quote]

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