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]Newsflash - you are not caught in the crossfire, you are part of a group of taxpayers who are targeted.  This is a feature, not a bug.

As for "it seems fundamentally unfair and would shake one's belief in any promise made by the Government in the future," don't be ridiculous.  Tax laws change all the time, sometimes they benefit you, sometimes they don't.  But that fact that they change is not, in and of itself, unfair.  Does it sting?  Sure.  Unfair?  Of course not.  At least this one is targeted at people who can afford it.  [/quote]

Many people planned and made decisions based on the protections that these accounts offered.  If we capped IRAs at $500k and taxed all distributions above that amount, I bet we'd see protests in the streets of DC.  By your definition, that would not be unfair.  It seems pretty unfair to me.  I see no reason why the cap couldn't be lowered to capture anyone at almost any level; when you look at the median income and net worth in this country, almost anyone who chose to save for 20-30 years rather than spend looks like a fat cat.

I understand PP's frustration with the [b]AAPL stock because early withdrawals from IRAs are taxed at short-term capital gains rates,[/b] so the people who tried to prudently plan, aren't just losing the IRA but are paying an extra double-digit % penalty by paying short-term capital gains tax on what would normally be capital gains.

It's also pretty obviously targeted just at Peter Thiel.  Nobody cared when Mitt Romney's $100m IRA was disclosed.  Something about Peter Thiel really pissed off the dems.  He has a few billion dollars to fight back with so it will be interesting to watch.[/quote]

This... isn't right. Unless you're saying that's what the proposal would be if the rules change? [/quote]

Roth withdrawals for those under 59 are taxed at short term / ordinary income tax rates.

If the PP had held AAPL outside their Roth in a normal account, it would be taxed at long term capital gains rates, which are lower.

Under the proposed law, not only are the Roth advantages rolled back but people are actually worse off than if they’d never done it in the first place.  I’m not sure if that’s intentionally or just a byproduct of what seems to be a hastily drafted bill.[/quote]

I mean, this is just a bill, there are details that will be changed, if it even goes forward.   I won't be surprised if they let it be long term capital gains rate.   But I still am just  not feeling bad  for people this impacts.[/quote]

New poster here:

If the bill goes forward they will either:
1. Require RMDs starting at 59.5 for any amounts over $10M
or
2. Require RMDs for amounts over $10M immediately, but waiving the 10% penalty and applying the LTCG tax rate if the holder is under 59.5 years of age

They will find a way to make it sensible and work.[/quote]

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