September 4, 2017 1:47 am

MyRAs Winding Down

MyRAs, which are a type of “mini-Roth IRA,” began in a pilot program in 2014 and went nationwide in 2015. However, due to the lack of interest and high cost to U.S. taxpayers in MyRAs, at the of July the Treasury announced (https://www.treasury.gov/press-center/press-releases/Pages/sm0135.aspx). As yet there is no end date to the program, but accounts that have been opened but remain unfunded as of September 15 2017, will be automatically closed beginning around September 18, 2017. Those that have been funded can continue to earn interest and receive additional contributions.

Those with existing MyRAs will be able to:

  • Receive a distribution. This can be done by logging into the account and requesting a distribution or calling a customer service representative. Only the earnings related to “non-qualified” Roth IRA distributions are taxable (contributions were nondeductible so are not taxed at distribution); a 10% penalty may apply to the earnings part of a non-qualified distribution for a person under age 59½.
  • Roll over the account to a Roth IRA. This will preserve the opportunity to obtain tax-free treatment for earnings (as well as contributions) on a later distribution that is “qualified”. It’s wise to make a direct trustee-to-trustee transfer. However, if a distribution has been taken, it can be rolled over within 60 days to avoid any tax.

The Treasury has promised more guidance, and we’ll bring it to you when it becomes available.

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Tax Glossary

Itemized deductions

Items, such as interest, state and local income and sales taxes, charitable contributions, and medical deductions, claimed on Schedule A of Form 1040. Itemized deductions are subtracted from adjusted gross income to arrive at taxable income. The amount of itemized deductions is also subject to a reduction when adjusted gross income exceeds certain limits.

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