Author Topic: Two questions: savers credit/IRAs and selling stuff on Ebay  (Read 4353 times)

neophyte

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Two questions: savers credit/IRAs and selling stuff on Ebay
« on: August 29, 2015, 08:36:05 PM »
TLDR Will Vanguard let me recharacterize a small amount from a Roth IRA to a traditional if I go over my AGI goal of $18k?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet?

The longer version
I'm going to try to max out the saver's credit for 2015 so I need to get my AGI under $18k.  I've looked at my pay stubs and tried to forecast exactly where I'll be at the end of the year. It's looking like I'm going to be just a little over the limit if I don't make any changes. No problem, I'll just up my 403b contribution a little.

But now I've got to consider all the little bits of income from interest, dividends, etc. I'm guessing that will be somewhere in the ballpark of $3200.  Now in order to get my AGI low enough I'm looking at putting 100% of my paycheck for the rest of the year into my 403b.  Barring emergencies, I should have enough in my bank accounts to swing that.

But what happens if I'm still just a little bit over the limit? I don't want to put myself through the anxiety of running down my bank accounts if I'm going to miss my goal by a few dollars. Can my IRA save me from this fate? I've made a couple thousand in Roth contributions so far this year and was planning to max it out by moving money from a taxable account to my Roth IRA. I know that if I go over $18k I can recharacterize some of my IRA contributions from Roth to traditional to get me under the limit, but will Vanguard let me recharacterize, say, $100?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet? 

Part two
What do I do about stuff I've been selling online? To throw out some hypothetical numbers, let's say the total of all the selling prices was $1000. After shipping, PayPal fees, etc I've got $800. But if I look at the original cost of the items, some of which I had for 10 years, and one refund due to mail loss, I'm looking at -200.  How do I deal with this on my taxes?

Thanks tax gurus!

seattlecyclone

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #1 on: August 30, 2015, 11:57:16 AM »
Per the IRS, if your eBay sales are the online equivalent of a garage sale (selling personal goods for less than you spent on them), you don't need to report them at all on your taxes. If you start selling stuff for a profit, then you have a business and need to report the income as such.

MDM

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #2 on: August 30, 2015, 01:36:23 PM »
TLDR Will Vanguard let me recharacterize a small amount from a Roth IRA to a traditional if I go over my AGI goal of $18k?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet?
Don't know about Vanguard's rules, but the IRS will let you recharacterize a partial amount.
E.g., see http://www.investopedia.com/articles/retirement/03/092403.asp and http://www.bogleheads.org/wiki/IRA_recharacterization.

Call Vanguard and ask.

Cathy

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #3 on: August 30, 2015, 01:39:36 PM »
If you start selling stuff for a profit, then you have a business...

Maybe. Just because you sell an asset for more than you bought it for, doesn't by itself mean you are engaged in a trade or business. It could alternatively be the disposition of a capital asset, which is taxable as a capital gain. The IRS page you linked to (which is not the law and cannot be relied on for any purpose) actually mentions this when it says that "[t]hese gains may be business income or capital gains". Once you do have income, you need to determine the character of it, but it sounds like OP has no income from the eBay activities so this is largely academic.

johnny847

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #4 on: August 30, 2015, 01:58:13 PM »
TLDR Will Vanguard let me recharacterize a small amount from a Roth IRA to a traditional if I go over my AGI goal of $18k?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet?
Don't know about Vanguard's rules, but the IRS will let you recharacterize a partial amount.
E.g., see http://www.investopedia.com/articles/retirement/03/092403.asp and http://www.bogleheads.org/wiki/IRA_recharacterization.

Call Vanguard and ask.

I've done partial recharacterizations with Vanguard before.

Jack

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #5 on: August 31, 2015, 09:29:24 AM »
TLDR Will Vanguard let me recharacterize a small amount from a Roth IRA to a traditional if I go over my AGI goal of $18k?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet?
Don't know about Vanguard's rules, but the IRS will let you recharacterize a partial amount.
E.g., see http://www.investopedia.com/articles/retirement/03/092403.asp and http://www.bogleheads.org/wiki/IRA_recharacterization.

Call Vanguard and ask.

I've done partial recharacterizations with Vanguard before.

I would expect to still be required to meet the fund minimum (e.g. $3000 for VTSMX). I suggest looking into target-date funds or the STAR fund, which have $1000 minimums.

johnny847

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #6 on: August 31, 2015, 01:59:25 PM »
TLDR Will Vanguard let me recharacterize a small amount from a Roth IRA to a traditional if I go over my AGI goal of $18k?  Or would I have to do the whole $3,000 or whatever the limit is for an initial contribution since I don't have a traditional IRA yet?
Don't know about Vanguard's rules, but the IRS will let you recharacterize a partial amount.
E.g., see http://www.investopedia.com/articles/retirement/03/092403.asp and http://www.bogleheads.org/wiki/IRA_recharacterization.

Call Vanguard and ask.

I've done partial recharacterizations with Vanguard before.

I would expect to still be required to meet the fund minimum (e.g. $3000 for VTSMX). I suggest looking into target-date funds or the STAR fund, which have $1000 minimums.

Oh oops I missed that aspect of the OP's question. Vanguard does say you will need at least $1k

neophyte

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #7 on: September 03, 2015, 10:37:56 PM »
Thanks for the help.  Good to know on the Ebay stuff.  Taxes on it would be negligible anyway, I just didn't want to worry about it bumping my AGI to $18050 or something!

Bummer about the Vanguard business though, since I can't imagine being more than a couple hundred max over the saver's credit limit and it's entirely possible it might be $10 or something.

Jack

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #8 on: September 04, 2015, 05:29:13 AM »
Thanks for the help.  Good to know on the Ebay stuff.  Taxes on it would be negligible anyway, I just didn't want to worry about it bumping my AGI to $18050 or something!

Bummer about the Vanguard business though, since I can't imagine being more than a couple hundred max over the saver's credit limit and it's entirely possible it might be $10 or something.

Even if you're only $10 over, it might be worth putting the full $1000 in the traditional IRA anyway. It wouldn't be theoretically "optimal," but it would be better than not doing it. Paying taxes on $1000 sometime in the far future in return for getting a $400-$1600 credit now is a win. Just make sure to calculate your taxes both ways and see which actually works out best for you.

Also, I just remembered: you could also open a Vanguard brokerage IRA and then -- I think -- buy Vanguard ETFs in it without any trade commissions. With ETFs, there is no account minimum except -- again, I think -- that you can't buy partial shares.

Mississippi Mudstache

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #9 on: September 04, 2015, 06:17:49 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA. I tried to contact them about buying ETFs but got no response, so I finally got annoyed and opened an IRA at Fidelity for her this year. They have tons of great commission-free ETFs (iShares) that are just as good as Vanguard's offerings. If you're committed to Vanguard ETFs, though, you can open an IRA through TD Ameritrade, who also offers commission-free ETFs, and many (most?) of them are Vanguard funds. My HSA investment account is through TD Ameritrade, and I've been very pleased with them.

Jack

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #10 on: September 04, 2015, 06:34:42 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Mississippi Mudstache

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #11 on: September 04, 2015, 07:01:18 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

johnny847

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #12 on: September 04, 2015, 09:22:26 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

That document is for a Traditional to Roth conversion.
Quote
To authorize a conversion from a Vanguard traditional IRA or Vanguard Brokerage traditional IRA to a Vanguard Brokerage Roth IRA
This will incur a tax liability.


The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #13 on: September 04, 2015, 09:36:52 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

Yeah, I know, but (as I mentioned) it was the closest thing I could find.

Mississippi Mudstache

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #14 on: September 04, 2015, 09:39:41 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

That document is for a Traditional to Roth conversion.
Quote
To authorize a conversion from a Vanguard traditional IRA or Vanguard Brokerage traditional IRA to a Vanguard Brokerage Roth IRA
This will incur a tax liability.


The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack mentioned in his comment that his link for for converting to a Roth brokerage IRA. I'm aware that converting a traditional IRA to a Roth will result in tax liabilities. Honestly, though, I'm done with Vanguard. Their customer service is subpar. Fidelity has always been immediately responsive and incredibly helpful. I also like that when I fund the account with an ACH, I'm able to trade immediately. I was able to take advantage of the dip last Monday because of this. I would have had to wait a week to invest in the Vanguard account. Fidelity's fees are right in line with Vanguard's, and in some cases better, so I no longer see any reason to stick with Vanguard. YMMV.

BarkyardBQ

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #15 on: September 04, 2015, 09:41:40 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

That document is for a Traditional to Roth conversion.
Quote
To authorize a conversion from a Vanguard traditional IRA or Vanguard Brokerage traditional IRA to a Vanguard Brokerage Roth IRA
This will incur a tax liability.


The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack mentioned in his comment that his link for for converting to a Roth brokerage IRA. I'm aware that converting a traditional IRA to a Roth will result in tax liabilities. Honestly, though, I'm done with Vanguard. Their customer service is subpar. Fidelity has always been immediately responsive and incredibly helpful. I also like that when I fund the account with an ACH, I'm able to trade immediately. I was able to take advantage of the dip last Monday because of this. I would have had to wait a week to invest in the Vanguard account. Fidelity's fees are right in line with Vanguard's, and in some cases better, so I no longer see any reason to stick with Vanguard. YMMV.

Vanguard fronts you money for any ACH transfer so you can buy right now. Instead of doing a transfer, you just BUY and it does, it settles your account and transfer like any ACH transfer.

johnny847

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #16 on: September 04, 2015, 09:55:01 AM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

Yeah, I know, but (as I mentioned) it was the closest thing I could find.

Okay, but the answer is simple, like I said previously. You conveniently cut off my quote.

The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack mentioned in his comment that his link for for converting to a Roth brokerage IRA. I'm aware that converting a traditional IRA to a Roth will result in tax liabilities. Honestly, though, I'm done with Vanguard. Their customer service is subpar. Fidelity has always been immediately responsive and incredibly helpful. I also like that when I fund the account with an ACH, I'm able to trade immediately. I was able to take advantage of the dip last Monday because of this. I would have had to wait a week to invest in the Vanguard account. Fidelity's fees are right in line with Vanguard's, and in some cases better, so I no longer see any reason to stick with Vanguard. YMMV.

Vanguard fronts you money for any ACH transfer so you can buy right now. Instead of doing a transfer, you just BUY and it does, it settles your account and transfer like any ACH transfer.

Agreed. MM, if you've been waiting a week with Vanguard to buy mutual funds, you've been doing it wrong this entire time. If I hit buy $10k of VTSAX before close of business today, by tomorrow I get credited for $10k of VTSAX in my account with a purchase date of today. This is despite the fact that Vanguard doesn't get my money until 2-3 business days later through ACH.

Mississippi Mudstache

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #17 on: September 04, 2015, 12:52:37 PM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

Yeah, I know, but (as I mentioned) it was the closest thing I could find.

Okay, but the answer is simple, like I said previously. You conveniently cut off my quote.

The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack mentioned in his comment that his link for for converting to a Roth brokerage IRA. I'm aware that converting a traditional IRA to a Roth will result in tax liabilities. Honestly, though, I'm done with Vanguard. Their customer service is subpar. Fidelity has always been immediately responsive and incredibly helpful. I also like that when I fund the account with an ACH, I'm able to trade immediately. I was able to take advantage of the dip last Monday because of this. I would have had to wait a week to invest in the Vanguard account. Fidelity's fees are right in line with Vanguard's, and in some cases better, so I no longer see any reason to stick with Vanguard. YMMV.

Vanguard fronts you money for any ACH transfer so you can buy right now. Instead of doing a transfer, you just BUY and it does, it settles your account and transfer like any ACH transfer.

Agreed. MM, if you've been waiting a week with Vanguard to buy mutual funds, you've been doing it wrong this entire time. If I hit buy $10k of VTSAX before close of business today, by tomorrow I get credited for $10k of VTSAX in my account with a purchase date of today. This is despite the fact that Vanguard doesn't get my money until 2-3 business days later through ACH.

Good to know. Though I wonder what, exactly, I've been doing wrong. In my Fidelity account, I set up an ACH transfer, and something to the effect of "$1000 Available to Trade" shows up in the account. If I do exactly the same thing on the Vanguard account, I don't get a notification that I have money available to trade until the ACH goes through. It's irritating. Why can PayPal transfer money instantly, but not banks? It makes no sense.

BarkyardBQ

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #18 on: September 04, 2015, 12:55:40 PM »
Good to know. Though I wonder what, exactly, I've been doing wrong. In my Fidelity account, I set up an ACH transfer, and something to the effect of "$1000 Available to Trade" shows up in the account. If I do exactly the same thing on the Vanguard account, I don't get a notification that I have money available to trade until the ACH goes through. It's irritating. Why can PayPal transfer money instantly, but not banks? It makes no sense.

Because Elon Musk.

TomTX

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #19 on: September 04, 2015, 01:40:48 PM »
Good to know. Though I wonder what, exactly, I've been doing wrong. In my Fidelity account, I set up an ACH transfer, and something to the effect of "$1000 Available to Trade" shows up in the account. If I do exactly the same thing on the Vanguard account, I don't get a notification that I have money available to trade until the ACH goes through. It's irritating. Why can PayPal transfer money instantly, but not banks? It makes no sense.

Because Elon Musk.

Yeah, banks are stuck about 1964 (invention of the fax machine.) Certainly not up to the invention of modern email (1972) since it is viewed with suspicion and denial for any actual functional use. 

johnny847

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Re: Two questions: savers credit/IRAs and selling stuff on Ebay
« Reply #20 on: September 04, 2015, 01:51:27 PM »
Beware: I've had no luck buying ETFs in my wife's Vanguard IRA.

To buy ETFs, you have to convert your "IRA account" to a "brokerage IRA account." This document describes the process for a Roth IRA, but I'm sure there's an equivalent one for a traditional IRA (although I can't seem to find it...).

Thanks, Jack. That was more helpful and responsive than Vanguard ever was.

Whoa Jack. This is completely the wrong document.

Yeah, I know, but (as I mentioned) it was the closest thing I could find.

Okay, but the answer is simple, like I said previously. You conveniently cut off my quote.

The answer to your question MM is your wife needs to open a tIRA brokerage account. Have her log in, and then go to my accounts, open an account.

Jack mentioned in his comment that his link for for converting to a Roth brokerage IRA. I'm aware that converting a traditional IRA to a Roth will result in tax liabilities. Honestly, though, I'm done with Vanguard. Their customer service is subpar. Fidelity has always been immediately responsive and incredibly helpful. I also like that when I fund the account with an ACH, I'm able to trade immediately. I was able to take advantage of the dip last Monday because of this. I would have had to wait a week to invest in the Vanguard account. Fidelity's fees are right in line with Vanguard's, and in some cases better, so I no longer see any reason to stick with Vanguard. YMMV.

Vanguard fronts you money for any ACH transfer so you can buy right now. Instead of doing a transfer, you just BUY and it does, it settles your account and transfer like any ACH transfer.

Agreed. MM, if you've been waiting a week with Vanguard to buy mutual funds, you've been doing it wrong this entire time. If I hit buy $10k of VTSAX before close of business today, by tomorrow I get credited for $10k of VTSAX in my account with a purchase date of today. This is despite the fact that Vanguard doesn't get my money until 2-3 business days later through ACH.

Good to know. Though I wonder what, exactly, I've been doing wrong. In my Fidelity account, I set up an ACH transfer, and something to the effect of "$1000 Available to Trade" shows up in the account. If I do exactly the same thing on the Vanguard account, I don't get a notification that I have money available to trade until the ACH goes through. It's irritating. Why can PayPal transfer money instantly, but not banks? It makes no sense.

Say you wanted to buy VTSAX. What is (are) the exact link(s) you click after you log into Vanguard?
My best guess is you hit the bank transfer button (which will put money in VMMXX), wait until that clears in Vanguard, and then buy VTSAX with your VMMXX shares. That's the slow way to do it.
If you want to buy VTSAX, you need to say buy VTSAX.

If we're talking about ETFs, you buy VMMXX first. Then you place an order for the ETFs you want. They give you a warning about needing to have funds before settlement date. That's fine. The ACH from Vanguard into your VMMXX will clear before the ETF purchase settles.
In the event the ACH pull is rejected, then Vanguard will call you saying they need to liquidate some of your shares of other funds to settle the ETF purchase, asking which shares to sell.