Can I Undo A Roth Conversion?

Q: I transferred about $80,000 in January from a traditional IRA to a Roth with the same company. It's now worth $15,000 less. Can I undo the transfer and then redo it so I don't have to pay taxes on the $15,000 in lost value?

A: You're in luck: This is one case where the IRS permits a do-over of the conversion so you can lower your tax bill.

When you convert a traditional IRA to a Roth, you normally need to pay income taxes on the full amount of the conversion (except for any non-deductible contributions), even if the account is worth a lot less by the time your tax bill is due. But you can shrink the tax bill by undoing the conversion and starting over again.

The process is called "recharacterization." If you ask the IRA sponsor to recharacterize your conversion and put your money back into a traditional IRA, then you don't need to report the original conversion to the IRS. Then you can convert the traditional IRA to a Roth later and pay taxes on the smaller balance.

The move could save you a lot of money. If you're in the 25% income-tax bracket and you have to pay taxes on the full $80,000 conversion, you'd end up with a $20,000 tax bill -- a hard pill to swallow, considering the account has lost so much money since then. But if you recharacterize and then convert the $65,000 balance to a Roth, your tax bill would shrink to $16,250 -- resulting in a $3,750 tax savings.

You have until six months after the due date of your 2008 return to undo a 2008 Roth conversion (October 15, 2009). But you can't reconvert the account to a Roth immediately. You have to wait until the year after the original conversion was made to reconvert the account, or at least 30 days after recharacterizing, whichever is later.

So if you recharacterize now, you'll have to wait until 2009 to reconvert the IRA to a Roth. If you recharacterize a 2008 contribution in 2009 (before the October 15, 2009, deadline) then you'll have to wait at least 30 days before switching the account to a Roth again. If you recharacterize after April 15, 2009, then you'll have to pay taxes on the conversion and file an amended return to get the money back.

Keep in mind that you can only convert a traditional IRA to a Roth in years when your adjusted gross income is below $100,000 (whether single or filing jointly), but that income limit disappears in 2010.

For more information, see the recharacterization and reconversion section of IRS Publication 590 Individual Retirement Arrangements.

Patriot Express Loan Initiative: Startup Capital For Vets!

Patriot Express Loan Initiative

The new Patriot Express loan is offered by SBA’s network of participating lenders nationwide and features our fastest turnaround time for loan approvals. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral.

The Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases.Patriot Express loans feature SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan.

Your local SBA district office will have a listing of Patriot Express lenders in your area.
To learn more about the Patriot Express Initiative:

Bush Appoints Sandy Baruah to Lead SBA

President Bush announced Wednesday his decision to appoint Sandy Baruah (bah-roo-ah) as head of the SBA. The decision came as somewhat of a surprise, as the acting administrator was expected to remain in charge until the end of Bush's term. It will be up to Bush's successor to determine whether to keep Baruah in the spot or nominate a new candidate.

If approved by the Senate, Baruah would replace Steven Preston, who was recently confirmed as Secretary of Housing and Urban Development. Jovita Carranza, the SBA's second-in-command as the deputy administrator, has been the agency's interim head.

Baruah is an assistant secretary of commerce. It's not yet known how the move will affect small businesses, but Sen. John Kerry (D-Mass.), chair of the Small Business and Entrepreneurship Committee, says he plans to review Baruah's record carefully to make sure he fits the job.

"The next administrator at the SBA must be ready to offer creative solutions for the current credit crunch, implement programs that will actually help women and minorities gain access to federal contracts and loans, and make sure that small firms have access to counseling and training to grow their businesses in this tough economic climate," Kerry says in a written statement.

Make 'Someday' Happen Today

Aristotle observed that every living organism has an inner force, a vitality that propels that organism to be fulfilled. He called that state of being entelechy.Everyone has an entelechy, a vital force that is yearning to be expressed. The entelechy of an acorn, for example, is to be an oak, and given the right environment and nutrition, that's what it will be.

Try as we might, we can't turn the acorn into a pine or a willow. Our entelechy is uniquely our own and is encoded in our very being. Essentially, our entelechy is who we were born to be.

Unfortunately, many of us are busy trying to turn our acorns into pine trees, and we don't even know it. We try, struggle and fight for success, getting only more trying and struggling and fighting as a result.

When we can know our entelechy, and make our thoughts, intentions and actions line up with that vitality, we find that we struggle less and enjoy more, achieving marvelous results along the way.

One way to know our entelechy is to look at those someday dreams we all have but somehow never get around to, or that just seem too unattainable to begin. It may appear counterintuitive, but we have found that as people express their entelechy, even though it may not seem directly related to the goal they have been trying to achieve, they start to see extraordinary results in other areas of their lives.

One of our executive clients, for example, wanted to double his sales results. When we moved more deeply from his goal to his entelechy, the force within that was calling for expression, he realized that what he wanted was to experience more energy and vitality in his life. He took on an exercise goal, began working with a physical trainer and ended up doubling his sales without really focusing on them. As we express our entelechy, we expand our creative capacity and begin to see growth on many levels.

Why would we suppress our entelechy? There are many reasons we give ourselves: I don't have the time, I'll wait until the kids are gone or until I retire or until I have more money or more education. All these reasons validate our decision to put that dream on the someday list, where it can sit for years, sapping our creative energy.

The good news is that you don't need much time, money, experience or any other resource to get started on your dream. In fact, a commitment of just 10 minutes a day, taken consistently, is enough to get over the overwhelm, get the creative energy flowing again and start seeing some real results.

Here's what you can do in just 10 minutes today:

Consider your someday dreams carefully. What is your life calling for? Take 10 minutes to write out a list of all the things you've been thinking about doing but haven't done.

Choose one thing on that list to experiment with. It doesn't matter which one you choose. Often in our coaching programs, people start with one thing, then start seeing results in other areas. We soon see people accomplishing everything from clearing off their desk to starting a global
program to end world poverty.

Spend 10 minutes focusing on that one thing you've selected. Imagine that you have successfully achieved whatever dream you've chosen. Fuel the fantasy with as much positive energy as you can. What would you be feeling if you woke up this morning and that dream had come true? That's the feeling you want to focus on. If you do nothing else with your someday dream but spend 10 minutes every day doing this exercise, you will see results.

Ask yourself, what is one small step I can take now that would get me closer to this imagined future? Can you make a phone call, spend 10 minutes on internet research, pick up some supplies the next time you are at the store?

Make small and easy action steps and find yourself quickly moving forward. Try it out for yourself on one of your someday dreams. Instead of saying "someday," you'll be doing something.

New SBA Tax Incentives

The Small Business Administration is trying to make it easier for businesses to take advantage of the investment incentives included in this year's economic stimulus package. The SBA created an online resource center that includes a fact sheet on the tax incentives available to small businesses that invest in new equipment this year. Small businesses can immediately write off up to $250,000 in new equipment this year, a doubling of the previous Section 179 expensing break. All businesses are eligible to depreciate 50 percent of the cost of new equipment in 2008.

The Web site also includes a depreciation calculator that businesses can use to estimate how much they would be able to depreciate in 2008 under the temporary tax break. In addition, the site provides a brief tutorial on the tax breaks.

SBA Acting Administrator Jovita Carranza said the stimulus package was designed to encourage "small businesses to invest and expand," but many business owners "are unaware of how it could boost their bottom line."

For more information, see www.sba.gov/stimulus

About Apprion Financial

At Apprion, we want to help exceptional people start great businesses. From self directed 401k/IRA plans to conventional lending, we offer a variety of solutions to help individuals get the capital they need. With our core product, the Apprion Ascent™ 401k, we provide clients with an effective way to fund their business with their retirement accounts without paying taxes or penalties.