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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

I had a 1099-C for about $135,000. My husband didn't have any withholding on Social Security. His employer couldn't withhold due to incompetence. I felt utter dread wash over me. Memories of owing the IRS before were constantly on my mind. I called a local CPA. Besides being clueless, he wanted to charge me for every question I had about insolvency. I looked on line and found little hope of the countless stories of permanently disabled people like myself getting their student loans forgiven only to be asked to pay taxes on it as if it were income.
Somewhere, somehow, I find an article by Gary Bode. I bookmarked it for when it's time to do the actual taxes. With his excellent help in how to do all of this out of a virtual office I get my part of the work done. My questions got answered, for free. I give a retainer, do what I said I did and wait. I hear from Gary. I go into shock! How can this be? Not only do I not owe on the 135,000....Gary itemizes and after paying what was almost nothing in taxes we get $950.00 back! No more hubby doing the taxes online! I will use Gary Bode as long as he will agree to work with me!
It was so easy, no worries, but professional and top notch. I know I have thanked you Gary but I am so grateful. Thank you ever so much again!

Carla Bray

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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CPA firm in Wilmington NC discusses Roth IRA Conversions

CPA Firm in Wilmington NC

Gary Bode, CPA: Roth IRA conversions don't always make financial sense and deserve proactive planning with your current Wilmington NC CPA

Roth IRA conversion: the IRS offers a unique opportunity in 2010 to convert traditional IRAs into Roth IRAs.  You can pay the tax on Roth IRA conversions over 2011 and 2012.  And, you can now convert even if your modified gross income exceeds $100,000.  Consult with your current Wilmington NC CPA proactively before making this decision. 

“Pay the tax on Roth IRA conversions from funds other than the traditional IRA accounts you conver. This avoids the 10% additional tax for early withdrawal on the amount used to pay the tax.” 
Gary Bode, CPA | Wilmington NC tax accountant

Traditional IRA vs. Roth IRA

Traditional IRA contributions are tax free when you make them, and only taxable when you withdraw them.  But limitations on traditional IRA contributions led to the development of Roth IRAs in 1998.  Contributions to Roth IRAs are made with post tax dollars but the eventual withdrawals are tax free.

Roth IRA Conversion Mechanics

Steps involved:

  • Planning.  Roth IRA conversion doesn’t make sense in all cases. 
  • The traditional IRA funds are deemed to be distributed to you, a taxable event. There are IRS wrinkles of course.  Mostly if you only partially convert them.
  • Calculate the taxes. Traditional IRAs often have taxable and non taxable components.  You have to know your basis in the IRA.
  • Actual Roth IRA conversion.  The funds are essentially rolled over into a Roth IRA account.
  • Fill out the IRS paperwork.  Think of this as part of your 2010 tax preparation.
  • Pay the tax.  The IRS allows you to pay the tax over 2011 and 2012, a nice incentive.

Roth IRA Conversion: General Example

Betty Wilmington, age 40, has four traditional IRA accounts totally $10,000. She has paid, and previously deducted on past Form 1040s, $5,000 of this $10,000. So, only $5,000 is taxable on withdrawal.  Roth IRA conversions don’t incur the 10%, “early withdrawal additional tax” if the traditional IRA  directly rolls over to a Roth IRA.  After appropriate CPA tax advice, Betty converts all of the $10,000 to a Roth IRA in 2010.  Her expected tax, on the taxable $5,000, is $1,500, using an aggregate IRS and NC tax rate of 30%.  Betty elects to pay $750 of the tax in 2011 and $750 in 2012.  Even with the one time IRS offer, paying the tax now is the down side of the scenario. Had Betty left the $10,000 in the traditional IRAs, instead of deciding on the Roth IRA conversion, it would have grown to $35,000 when she draws it out during retirement.  $30,000 of which would be taxable under expected IRS regulations.  Even at an aggregated IRS and NC tax rate of 20%, the taxes are $6,000, $4,500 more than with the Roth IRA conversion.

If you’d like a free initial consult with a Wilmington NC CPA firm, on Roth IRA conversion, or any other tax or accounting issue, please call us at (910) 399-2705.

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