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Q2 Newsletter 2024

The Benefits of Roth Conversions

The Real Money Pros

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Roth Coversions

In the world of retirement planning, few strategies shine as brightly as Roth IRA conversions. These conversions offer a pathway to greater control over tax liabilities, enhanced flexibility in retirement income, and a legacy of financial security for your loved ones. Let's explore how you can harness the benefits of Roth conversions to maximize your retirement strategy.

Understanding Roth Conversions

At its core, a Roth IRA conversion involves transferring funds from a traditional IRA or 401(k) into a Roth IRA. The fundamental difference lies in the tax treatment: traditional IRAs are funded with pre-tax dollars, while Roth IRAs are funded with after-tax dollars. This means that with a Roth IRA, your qualified withdrawals in retirement are entirely tax-free.

The Magic of Tax Control

One of the most compelling advantages of Roth conversions is the ability to take control of your taxes. By strategically converting funds from a traditional IRA to a Roth IRA, you can navigate the tax brackets to your advantage. This means potentially paying lower taxes now or in retirement, depending on your income levels.


Let's consider a scenario: you're in a year with lower income, perhaps due to a career change or a sabbatical. This presents an opportune moment to convert funds to a Roth IRA. By doing so, you trigger an immediate tax bill on the converted amount. However, as the funds grow within the Roth IRA, they do so tax-free. When you reach retirement age and start withdrawing from your Roth IRA, those withdrawals are entirely tax-free, offering a valuable source of income without the burden of taxes.


Imagine reaching retirement age and having a tax-free source of income waiting for you. That's precisely what Roth conversions offer. Whether you use your Roth IRA funds to supplement Social Security, cover healthcare expenses, or simply enjoy your retirement, the flexibility is yours to decide.


Furthermore, Roth conversions can be particularly beneficial if you anticipate being in a higher tax bracket in retirement. By paying taxes now on the converted amount at a lower rate, you avoid potentially higher taxes on withdrawals in the future. This strategic maneuvering allows you to optimize your retirement income while minimizing tax burdens.


By having a mix of taxable and non-taxable income sources in retirement, you gain flexibility in managing your tax liability. For example, if you have a year with higher expenses, you can draw from your taxable accounts to meet those needs while keeping Roth IRA withdrawals to a minimum. This strategic approach allows you to control the amount of taxable income each year, potentially reducing your overall tax bill.

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Legacy Planning for Your Loved Ones

Beyond your own retirement, Roth conversions offer a gift to your heirs. When you convert funds to a Roth IRA, you're essentially shielding those assets from future taxes. This means that when your heirs inherit your Roth IRA, they receive a valuable financial asset that is entirely tax-free.


Consider the peace of mind knowing that you're leaving behind a legacy of financial security for your loved ones. Whether it's funding their education, helping with a down payment on a home, or simply providing a cushion for life's uncertainties, your Roth IRA can serve as a lasting gift.


Navigating Market Volatility with Roth IRAs

In times of economic uncertainty and market volatility, having a portion of your retirement savings in a tax-free Roth IRA can offer stability and peace of mind. Since Roth IRAs grow tax-free, they provide a valuable hedge against future tax changes.


By diversifying your retirement portfolio to include a Roth IRA, you create a safety net for your savings. This tax-efficient growth allows you to weather market ups and downs while preserving your hard-earned wealth.

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How to Get Started with Roth Conversions

  • Assess Your Tax Situation: Consider your current income, tax bracket, and potential future tax scenarios. Determine if a Roth conversion aligns with your financial goals.

  • Calculate the Conversion Amount: Decide how much you want to convert from your traditional IRA or 401(k) into a Roth IRA. Keep in mind that this amount will be added to your taxable income for the year of the conversion.

  • Plan for the Tax Payment: Since a Roth conversion triggers an immediate tax bill, ensure you have funds available to cover the taxes owed. You can choose to withhold taxes from the conversion amount or pay them separately.

  • Invest Wisely for Growth: Once the funds are in your Roth IRA, invest them strategically for long-term growth. Consider a diversified portfolio that aligns with your risk tolerance and financial objectives.

  • Enjoy Tax-Free Income in Retirement: When you reach retirement age, you'll have a valuable source of tax-free income waiting for you. Whether you use it to travel the world, pursue hobbies, or simply relax, your Roth IRA can provide the financial freedom you deserve.

In conclusion, Roth IRA conversions offer a powerful tool to turbocharge your retirement savings and tax efficiency. By taking control of your taxes, enhancing your retirement income, and leaving a lasting legacy for your heirs, you pave the way for a brighter financial future. Be sure to consult with a financial advisor or tax professional to explore how Roth conversions fit into your retirement strategy.


Here's to maximizing your retirement potential and enjoying the benefits of tax-free income in your golden years!

Watch our most recent video explaining some Roth strategies to implement in retirement and how to maximize savings.

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Financial Software
for the Self-Employed

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Financial Software for the Self-Employed
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Did you just overpay on taxes? Letʼs flip that script!

If you're a self-employed professional, you know that tax season can be a pain. Navigating the complexities of 1099 filings, estimating quarterly payments, and maximizing deductions requires expertise—missteps can cost thousands, and no one wants to see their hard-earned money go to waste!

At Formations, weʼre here to help you keep more of what you earn. And for friends of The Real Money Pros, weʼre offering completely complimentary tax consultations tailored specifically for 1099 professionals.

Use the button below to schedule your free consultation, and NEVER question if youʼre overpaying again.

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We are the S Corporation experts for the self-employed and can help you decide if and when an S Corp is right for you. Not sure what an S Corp is? Simply put, S Corps are a tax classification that can be elected with the IRS, applicable to your business entity, such as an LLC. This designation allows the self-employed to act both as the owner and an employee of their business.

As an employee, youʼll pay yourself a reasonable salary, and you can take the remaining income as distributions. These distributions are not subject to self- employment tax, allowing you to keep MORE of what you earn. You also get more access to corporate-level benefits.

However, the timing and eligibility for S Corp status can vary based on your location, industry, and specific regulations. Thatʼs where we come in: our seasoned professionals are well-equipped to navigate these complexities, ensuring that you transition at the optimal moment and remain in full compliance.

Let us help you optimize your earnings and elevate your business to the next level.


brought to you by:


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Maximizing Your Credit Score
for Home Purchase Success:
Here’s what to do!

Dave Perry, Guild Mortgage

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Maximizing Your Credit Score

As you embark on the exciting journey of purchasing a home, it's crucial to consider your credit score, which plays a pivotal role in the mortgage approval process, influencing the interest rates you qualify for and the loan amount you can secure. To ensure your credit score is optimized for purchasing a home, here are some key strategies to implement.

Firstly, regularly monitor your credit report by obtaining a copy from major credit bureaus such as Equifax, Experian, and TransUnion. Review the report for inaccuracies or discrepancies and promptly dispute any errors you find. Ensuring the accuracy of your credit report is essential as it directly impacts your credit score.

Next, focus on paying your bills on time as payment history constitutes about 35% of your credit score. Make timely payments on all your credit accounts, including credit cards, loans, and utility bills. Set up reminders or automatic payments to avoid missing due dates, which can negatively affect your credit score.

Additionally, aim to keep your credit utilization ratio low. Pay down existing debts and avoid maxing out your credit cards to maintain a healthy credit utilization ratio, preferably below 30%.

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Another effective strategy is to refrain from opening new credit accounts before applying for a mortgage. Each new credit application results in a hard inquiry on your credit report, which can temporarily lower your credit score. Instead, focus on improving your existing credit profile.

Furthermore, maintain a diverse credit mix by showcasing your ability to manage different types of credit responsibly. Lenders prefer to see a variety of credit accounts, such as credit cards, installment loans, and mortgages, in your credit history.

To reduce unsolicited credit offers and potentially boost your credit scores, visit to electronically "opt out" of receiving such offers. This proactive step can also reduce the risk of identity theft and fraud.

Lastly, be mindful of unnecessarily closing old credit accounts. Keeping older accounts open, even with zero balances, can benefit your credit score over time due to the positive impact of length of credit history.

By implementing these strategies and staying proactive about managing your credit, you can optimize your credit score and improve your chances of securing a favorable mortgage for your dream home. A strong credit score opens doors to better loan options and lower interest rates, making your home buying journey smoother and more cost-effective.


written by:

Dave Perry, Branch Manager

brought to you by:

Guild Mortgage

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Filing a Tax Extension?
What You Should Know

Stephanie Helms, CPA

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Filing a Tax Extension

Another tax deadline has come and gone, and CPAs around the nation rejoice—well, sort of. Tax firms had a very busy week leading up to this year’s deadline to file, and many tax returns were extended. In order to clear up any misunderstanding, this article will highlight and explain estimated payments, tax extensions, penalties, and interest.

Estimated Payments

A common misconception is that an extension to file is an extension to pay, which is not the case. If a return is extended and taxes are due, the taxpayer will have to make an estimated payment by the April 15th deadline to reduce underpayment penalties and interest due. If you have estimated payments required for the following tax year, the coupons will print in your return. The IRS likes to receive estimated payments throughout the year, similar to payroll withholding. The dates these payments for 2024 are due are shown below.

1st Quarter: April 15, 2024

2nd Quarter: June 17, 2024

3rd Quarter: September 16, 2024

4th Quarter: January 15, 2025

There is, however, a safe harbor for underpayment penalties. Individuals are subject to an underpayment penalty unless total withholding and estimated payments (the quarterly payments) equal the smaller of:

- 90% of the tax shown on the 2023 return or

- 100% of the tax shown on the 2022 return

If the tax due is less than $1,000 after withholdings are subtracted, no underpayment penalty will be applied.


Filing an Extension

The safest bet is to always file an extension if a return will not be filed on time. Most CPA firms will file an extension on your behalf and recommend that you make an estimated payment for the tax due by April 15th. When there is no tax owed or you will have a refund, there will be no penalties or interest when the return is filed.

Penalties & Interests

If you file an extension but do not make an estimated payment by the deadline, interest will accrue along with penalties, known as Failure to Pay and Failure to File. The Failure to Pay penalty is .5% each month, maxing out at 25% of tax owed, and interest on the tax at an annual rate of 8%. This amounts to about 1.16% in interest and penalties each month the tax is unpaid. For example, if $1,000 is owed, the penalty and interest is $12 for the month. However, if your return is not filed with an extension by the October 15th due date, a Failure to File penalty will be added, which will be 5% of tax due for each month the balance is unpaid, made up of .5% from the Failure to Pay penalty and 4.5% from the Failure to File penalty, along with the same interest rate. So, what was $12, is now $57, and it adds up quick.


What to do Next

Taxes can get messy and complicated. It can be stressful not knowing what to do and how to navigate these concerns. Proactive tax planning during the tax year can help to mitigate the risk of facing penalties and interest in the future, and CPA firms are there to help with exactly that. If you think there will be changes to your income or your tax owed in the coming tax year, consult with your CPA or tax professional for tax planning and estimation of tax. Rather than running from taxes, proactively management taxes and take the stress out of the season!

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written by:

Stephanie Helms, CPA

brought to you by:

Stewart & Associates, P.A.
Superior Cloud Accounting

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Navigating New Federal Regulatory Changes

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Federal Regulatory Changes

In the swiftly evolving realm of business regulations, it is crucial to stay informed and ready to ensure your business remains compliant and competitive. Sweeping changes to employment regulations that were announced recently by the Department of Labor (DOL) and the U.S. Federal Trade Commission (FTC) are expected to dramatically impact businesses across the United States.


Minimum Salary Levels and Overtime Pay 

Effective July 1st, 2024, the Department of Labor will increase the standard salary exempt amount to $844 weekly and $43,888.00 annually. This threshold will rise to $1,128 weekly and $58,656 annually on January 1st, 2025. An employee’s job duties will determine overtime exemption status for most salaried employees. It's essential to note that some states may set higher thresholds than the federal minimum.


The new rule also raises the total annual compensation requirement for highly compensated employees. On July 1st, 2024, this requirement increases to $132,964 annually and further to $151,164 annually on January 1st, 2025.


With the salary level adjustments in January 2025, the DOL has estimated that 1 million workers across the U.S. will be impacted with another 3 million works to be impacted with the second adjustment in January 2025. Based on the new ruling, the salary level thresholds will be automatically updated every three years after that based on current wage data. 


The impact of this on your business does not stop at the people who may be under these new limits.  Bringing employees up to these new levels will require you to address the employees that are currently right at or just above these limits.  How you address them and their expectations about pay levels can create a ripple effect of unintended consequences for your entire company.


Nationwide Ban on Noncompete Agreements

The Federal Trade Commission also issued a final ruling on noncompete agreements that will significantly impact employment practices across the country. Under the new ruling, existing noncompete agreements for most workers will no longer be enforceable. This ruling is set to be effective 120 days after publication into the Federal Register, which is expected to be in early September 2024.  


The ban on noncompete agreements encompasses all U.S. workers, including both employees and independent contractors, with few exceptions dictated by the FTC's statutory authority. Notably, financial service industries, banks, and medical physicians are excluded from this ban.


Existing noncompete agreements for Senior Executives can remain in force, but employers are banned from entering or attempting to enforce any new noncompete agreements, even if they involve Senior Executives. Senior Executives are defined as workers earning more than $151,164.00 annually and who are in a position to make policy changes. 


Employers are required to deliver notifications to both current and former employees who were subject to noncompete clauses. These notifications must be personalized to each individual and clearly communicate that their noncompete clause cannot be legally enforced against them. While the ban on noncompete agreements is far-reaching, there are exceptions and nuances to consider. Understanding these exceptions is essential for ensuring compliance and understanding the full impact this regulation will have on your business. 


Preparing Your Business

Like many new laws, the noncompete ruling is likely to face legal challenges, potentially leading to delays in enforcement. While some companies might opt for a "wait and see" stance, a more prudent approach would involve reassessing current employment practices, identifying necessary adjustments for compliance, and carefully evaluating the cost implications of workplace changes.


As potential lawsuits progress through the legal system, discussions about these regulatory changes will persist across various public platforms. As employees become increasingly aware of these regulatory shifts, it is likely that their views on the workplace will change. 


Here are proactive steps employers can take to enhance employee satisfaction, engagement, and retention amid regulatory changes:


  • Foster open communication channels and actively solicit feedback from employees to address their concerns and ideas for navigating changes effectively. 

  • Highlight your company’s dedication to employee development, offering career advancement paths, competitive compensation packages, and comprehensive benefits. 

  • Explore options for flexible work arrangement or other initiatives promoting a work-life balance to bolster employee engagement and retention. 

  • Review existing retention strategies and adapt them to meet evolving needs effectively. 

  • Stay abreast of regulatory updates and their impact on employee perceptions and concerns. 

  • Implement non-disclosure or confidentiality agreements to safeguard sensitive information, as these agreements are not affected by the FTC ruling.


Here For You 

At Ataraxis PEO (Professional Employer Organization), we handle the intricacies of constantly evolving laws and regulations, ensuring your business remains compliant and ready for the future. Our team of subject matter experts will not only collaborate with you on employment strategies, but we will do the work and provide the day-to-day HR support your employees require to thrive, just like an in-house department would do. You will be able to leverage our expertise in employee development, engagement, and regulatory compliance while having more time to focus on managing and growing your business. 


I am happy to talk through any questions or thoughts you have about these new rules and laws, regulatory compliance, or challenges in general you are facing in today’s highly competitive business environment and how they may directly affect your business.


I look forward to talking with you!

- Stephen Cilley


brought to you by:

Stephen Cilley, CEO
Ataraxis PEO

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