Thursday, January 15, 2015

Tax Consequences For Foreign Students...Think F, J Visas

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My husband & I chartered a course ourselves long ago in the stormy waters of visas, tax treaties and tax consequences. Considering taxes have just got even more complicated, so its no surprise that I field quite a lot of questions from various visa holders especially foreign students on F-1 visas. Suffice to say that the range of information for foreign students is too much to cover in one blog post, so I will focus on the main points. If you need any more information, you know where to reach me! 

If you are a foreign student, you already know from your university that you are one of those who are subject to special rules with respect to the taxation of your income. Usually a foreign student is on an F, J, M, or Q visa. 

The Substantial Presence Test (SPT): 

Most US residents, citizens or not, have to follow the substantial presence test in order to determine how they will file their taxes. 
  • To fulfill the SPT, one must pass both the 31-day & the 183-day test. 
  • However, if you are a foreign student on any of the above visas, you are considered an "exempt" individual. 
  • You cannot be exempt for more than 5 calender years. 
  • Unless (don't you love an exception to an exception?)- you can prove to the IRS that you were more closely connected to your home country. 
Tax Payer Identification Numbers (TIN)/ Social Security Numbers (SSN):

Most foreign students and scholars in F-1, J-1, M-1, Q-1, and Q-2 non-immigrant status are eligible to be employed in the United States, and are therefore eligible to apply for an SSN if they are actually employed in the United States

Social Security/ Medicare Tax:

Generally nonresident Alien students present in the United States in F-1,J-1,M-1, or Q-1/Q-2 non-immigrant status are exempt on social security tax on wages paid to them,  
  • For services performed within the United States as long as such services are allowed by USCIS for their status, 
  • And such services are performed to carry out the purposes for which the visa was issued to them.

Exempt Employment may include:
  1. On-campus student employment up to 20 hours a week (40 hrs during summer vacations).
  2. Off-campus student employment allowed by USCIS.
  3. Practical Training student employment on or off campus.
  4. Employment as professor, teacher or researcher.
  5. Employment as a physician, au pair, or summer camp worker.

Limitations on exemption are:
  1. The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 non-immigrant status.
  2. The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
  3. The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 non-immigrants who change to an immigration status which is not exempt or to a special protected status.
  4. The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 non-immigrants who become resident aliens.

Scholarships, Fellowships and Grants:

Generally scholarships, fellowships and grants paid to foreign students is not reportable nor are they taxable. However, the following must be kept in mind: 

  1. All amounts paid to NONRESIDENT ALIENS in the form of scholarships, fellowships, grants, and financial aid, which are not excludible from gross income as a "qualified scholarship" under Internal Revenue Code section 117 must be reported to IRS on Forms 1042 and 1042-S.
  2. Foreign students are subject to a reduced 14% withholding rate (rather than the regular 30%) on the taxable portion of a scholarship/ fellowship/ grant because such individuals are considered to be engaged in a U.S. trade or business under Internal Revenue Code section 871(c). This is not applicable if the foreign student is a non-degree candidate.
  3. If the foreign student wants to claim that part or all of his scholarship or fellowship is exempt from taxation because of a tax treaty must file Form W-8BEN with the university office charged with receiving and processing such forms. Or he may claim a treaty exemption on Form 8233. 
Tax Treaty With Home Country:

If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, withholding for certain items of income, you should notify the payer of the income (the withholding agent) of your foreign status to claim the benefits of the treaty. You cannot do this however, if you have made an election with your U.S. citizen or resident spouse to be treated as a U.S. resident for income tax purposes. 

However, the exceptions to the saving clause in some treaties allow a resident of the United States to claim a tax treaty exemption on U.S. source income.

Like I always say, there are many nuances and exceptions to all of the above, that I cannot possibly cover in a single blog post. Please contact a tax professional to address your unique situation if you are a foreign student. 

Bibliography: Pub 519; Form W-8BEN; Form 8233; Form 8833;; § 6114; § 7701; Tax Treaties

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Tuesday, December 30, 2014

Tax Extenders, Tax Extenders....Check If You Won The Extender Lottery!!

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Well, it is December 30th, 2014 and as I sit down to write up the last blog post of the year, I realize how much I have enjoyed writing this year! This blog has brought a lot of traffic my way, I have gained a few clients, engaged in some very interesting conversations with fellow professionals and learnt a lot about the roller-coaster social media world! Thanks to my readers from the bottom of my heart! 

The conversations around tax planning sessions these days has been how quickly can we file in the coming tax season (hopefully on time!) and of course the hype around the Tax Extenders Bill that Congress passed early this month and President Obama signed soon after. So what was the drama all about? 

Individual Tax Extenders:

These are the tax breaks that were set to expire at the end of the year and have been extended through the end of 2014: 

  • State and Local General Sales Tax Deduction: 
Taxpayers can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A of Form 1040. The taxpayer may either deduct the actual amount of sales tax paid in the tax year, or, alternatively, an amount prescribed by the IRS. 

  • Mortgage Insurance Premiums Treated As Qualified Residence Interest:
Mortgage insurance premiums (MIP) are generally charged by your mortgage company if you had a down payment of less than 20% of the loan. Taxpayers can treat mortgage insurance premiums paid during the year for qualified mortgage insurance as qualified residence interest. So you can continue to deduct MIP paid during the year on your Schedule A of Form 1040. 
In order to do this, the insurance must be in connection with acquisition debt (mortgage) for a qualified residence, and the insurance contract must have been issued after 2006. 
This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000 (half those amounts for married taxpayers filing separately). 

  • Exclusion From Income of Discharge of Qualified Principle Residence Indebtedness:
This is a big one! If you had an outstanding balance on your mortgage & if it was forgiven, this discharge is still generally excludable from your gross income. 

  • Deduction for Qualified Tuition and Related Expenses:
You may deduct up to $4,000 of qualified education expenses paid during the year for yourselves, your spouse, or your dependents. 
Your maximum deduction is $4,000 if your adjusted gross income for the tax year does not exceed $65,000 ($130,000 in the case of a joint return), or $2,000 for other individuals whose adjusted gross income does not exceed $80,000 ($160,000 in the case of a joint return). 
For those with incomes above the maximum threshold, no deduction is allowed. 

  • Tax-Free Distributions from IRA Plans to Charity:
A qualified charitable distribution from an individual's IRA is excluded from the individual's gross income. If you are 70 1/2 years of age, you can exclude up to $100,000 per taxpayer, per year. 

  • Certain Expenses of Elementary and Secondary School Teachers:
If you are an elementary or a secondary school teacher, you can exclude up to $250 of qualified expenses they paid during the year from gross income. If you are filing jointly and are both elementary or secondary school teachers, you can each include $250 in expenses paid. 

  •  Parity for Employer-Provided Mass Transit and Parking Benefits: 
Tax Increase Prevention Act (TIPA) of 2014 extends through 2014 the maximum monthly exclusion amount for transit passes and van pool benefits to $250 per month so that these transportation benefits match the exclusion for qualified parking benefits. 

  • Contributions of Capital Gain Real Property Made for Conservation Purposes:

 If you contributed to a qualified conservation purpose, your deduction is generally limited to 50% of your adjusted gross income (AGI), minus your deduction for all other charitable contributions. TIPA extends this and also extends the enhanced 100% deduction for individual and corporate farmers and ranchers for contributions of property used in agriculture or livestock production. 

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There were tax breaks that were not extended, these were: (1) the health coverage tax credit for displaced workers and retirees; (2) the plug-in motorcycle tax credit; (3) the energy-efficient appliance credit; (4) New York Liberty Zone tax-exempt bond financing and; (5) partial expensing of refinery equipment.

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,


Friday, December 19, 2014

The Mysterious Form 1099-MISC- Unveiled!

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My first interesting encounter with the Form 1099-MISC was many, many years ago when I worked with a big box tax prep company. A guy walked in with literally a shoe-box full of these forms all made out to him under his Social Security Number. We spent quite a huge chunk of time getting through those but boy did I learn fast on the ins & outs of this mysterious form! 

What is Form 1099-MISC?: 

Form 1099-MISC, Miscellaneous Income, is issued to a person if any of the following situations occur, when a trade or business or some other qualified organization pays:

  • If at least $10 in royalties or broker payments are paid to a person 
  • At least $600 in: rents; services performed by someone who is not your employee; prizes and awards; other income payments; medical and health care payments; crop insurance proceeds; cash paid from a notional principal contract to an individual, partnership, or estate; payments to an attorney among others, are paid to a person.
  • To report that direct sales of at least $5,000 of consumer products were made to a buyer for resale anywhere other than a permanent retail establishment. 

What Would You Do If You Received A Form 1099-Misc?:

If any of the above circumstances applied to you, and you happened to receive a Form 1099-MISC, you would first look at what box of the form, the amount is reported in. For example, items in, boxes 1 & 2 would most of the times go on the Schedule E; box 3 on line 21; box 7 on a Schedule C; and so on. Instructions in greater detail are here

Items in Box 7, Non-Employee Compensation: 

Usually, you would be issued a Form 1099-MISC with amounts in Box 7 if you were an independent contractor and were not on an organization's payroll. These numbers would usually go on a Schedule C, you would be able to deduct costs related to obtaining this income. The expenses to be deducted need to be backed up by receipts and please note that this is a highly audited area by the Internal Revenue Service, hence due diligence has to be maintained at all times with record-keeping. 

If you need to know if you were an independent contractor versus an employee, please do read my blog-post here

Change in Tax Liability Due to Form 1099-MISC: 

Most times, if you know that you will receive a Form 1099-MISC from someone, and/ or it is the first time you have ever received such a form, be prepared that your taxes for the year may be higher than usual. You will have to consult with a tax professional to estimate what your tax liability might be. 

FATCA Filing Requirements of Certain Foreign Financial Institutions (FFIs): 

Beginning in 2014, an FFI with a Chapter 4 requirement to report a U.S. account maintained by them, and held by a specified U.S. person may satisfy this requirement by reporting on Form 1099-MISC. 

Also, a U.S. payor may satisfy its Chapter 4 requirement to report such a U.S. account by reporting on Form 1099-MISC. 

A new check box was added to Form 1099-MISC to identify an FFI filing this form. So, if you receive a Form 1099-MISC with a check in the box "FATCA Filing Requirement", examine your filing thresholds for FinCEN Form 114 and/ or Form 8938. More about these thresholds in my blog posts here, here and here.  

Please consult a qualified tax professional if any of the above apply to you. A tax professional has the tools at their disposal to give you the best advice there is and guide you with your future in mind. 

Bibliography: Form 1099-MISC; FinCEN Form 114; Form 8938;  Regulations section 1.1471-4(d)(5)(i)(A). 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Saturday, December 13, 2014

This Just In! Final Regulations On Reporting of Foreign Specified Assets On Form 8938!

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If you remember from my blog post here, Form 8938, is the Statement of Specified Foreign Financial Assets. This form is required to be filed to remain in compliance with IRC § 6308D. You may not have known that the Internal Revenue Service hadn't yet made the 2011 rules & regulations under this code final, comments & concerns were still being gathered. 

The Internal Revenue Service on December 11th, 2014 has issued final regs that provide guidance on the requirement under Code § 6038D, for Form 8938 filers. This provides more information and clarifications on certain filers, types of assets to be reported, valuation etc.

The final regs apply for tax years ending after Dec. 19, 2011, but taxpayers may apply them to earlier years.

To quickly recap, the Form 8938, has to filed by individuals with an interest in a "specified foreign financial asset" during the tax year in which the aggregate value of all such assets at the end of the year is $50,000 for Single filers and $100,000 for filers with the status Married Filing Jointly. IRC § 6308D also applies to a domestic entity that has been formed or used for purposes of holding specified foreign financial assets in the same way as if it were an individual. 

If the Form 8938 is not filed as required during a tax year, there is a penalty of $10,000. This penalty increases if the taxpayer continues to stay non-compliant.

Specified Foreign Financial Assets are:

(1) Depository or custodial accounts at foreign financial institutions, 
(2) To the extent not held in an account at a financial institution, 
       (a) Stocks or securities issued by foreign persons, 
       (b) Any other financial instrument or contract held for investment that is issued by 
            or has a counter-party that is not a U.S. person, and 
       (c) Any interest in a foreign entity. 

  Final regs. 
In late December of 2011, IRS issued temporary and proposed regs detailing the Code Sec. 6038D requirement for individuals to attach a statement to their income tax return to provide information on foreign financial assets in which they had an interest At that time, IRS also released the final version of Form 8938 (Statement of Specified Foreign Financial Assets) and its Instructions.

IRS has adopted the 2011 temporary regs as final regs with certain modifications described below. 

Dual resident taxpayers: 
The final regs provide an exemption from the Code Sec. 6038D reporting requirements for a dual resident taxpayer who determines his U.S. tax liability as if he were a nonresident alien and claims a treaty benefit as a U.S. nonresident by 
  • Timely filing a Form 1040NR, Nonresident Alien Income Tax Return (or such other appropriate form under that section), and 
  • Attaching a Form 8833, Treaty-Based Return Position Disclosure. 

Persons not required to file tax return:
As provided in the 2011 temporary regs, the final regs provide that a specified person that doesn't have to file a tax return for the year doesn't have to file a Form 8938.

Non-vested property: 
The final regs clarify that a specified person that is transferred property in connection with the performance of personal services is first considered to have an interest in the property for purposes of Code Sec. 6038D on the first date that the property is substantially vested or, in the case of property with respect to which a specified person makes a valid election under Code Sec. 83(b), on the date of transfer of the property. 

Assets held by a disregarded entity (most times an LLC):
The final regs provide that a specified person that owns a foreign or domestic entity that is a disregarded entity, is treated as having an interest in any specified foreign financial assets held by the disregarded entity. 
As a result, a specified person that owns a disregarded entity (whether domestic or foreign) that, in turn, owns specified foreign financial assets, must include the value of those assets in determining whether the specified person meets the reporting thresholds under IRC § 6308D and, if so, must report the assets on Form 8938. 

Jointly owned assets for those who are not married to each other:
The final regs clarify that each of the joint owners of a specified foreign financial asset who are not married to each other must include the full value of the asset (rather than only the value of the specified person's interest in the asset) in determining whether the aggregate value of the specified individual's specified foreign financial assets exceeds the applicable reporting thresholds, and each joint owner must report the full value of the asset on his or her Form 8938. 

Jointly owned assets for those who are married to each other, but file separately:
The final regs also clarify that, in the case of joint owners who are married to each other and file separate returns, each joint owner of a specified foreign financial asset must report the full value of the asset (rather than only the value of the specified person's interest in the asset) on the individual's Form 8938, even if both spouses are specified individuals and only one-half of the value of the asset is considered in determining the applicable reporting thresholds under IRC§ 6038D. 

Specified foreign financial assets: 
The final regs modify the definition of a financial account for purposes of Code Sec. 6038D in order to require consistent reporting under Code Sec. 6038D with respect to:  

  • Retirement and pension accounts and certain non-retirement savings accounts:      For tax years beginning after Dec. 12, 2014, the final regs also provide that retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in Reg. § 1.1471-5(b)(2)(i) and that are excluded from the definition of a financial account under an applicable Model 1 IGA or Model 2 IGA (as provided in Reg. § 1.1471-5(b)(2)(vi)), are included in the definition of a financial account for Code Sec. 6038D purposes. 
  • Stock, securities, financial instruments, and contracts that are held for investment: The final rule clarifies that specified foreign financial assets include stock, securities, financial instruments, and contracts that are held for investment and not held in an account maintained by a financial institution and are issued by a person organized under the laws of a U.S. possession. 

The final regs clarify that the maximum fair market value for a specified foreign financial asset with no positive value during the year is treated as zero. 

Foreign currency:
The final regs adopt two modifications to the valuation rules relating to foreign currency:  
  • First, the final regs state that a foreign currency conversion shown on a periodic financial account statement is among the aspects of the statement that a taxpayer may rely upon to the extent provided in Reg. § 1.6038D-5(d).
  • Second, IRC § 6038D of the 2011 temporary regs provides that, except as otherwise provided, a specified person must use the foreign currency exchange rate issued by the U.S. Treasury Department's Financial Management Service for purposes of Code Sec. 6038D. The final regs are updated to reflect the fact that foreign currency exchange rates are now issued by the Treasury Department's Bureau of the Fiscal Service. 
Please consult with a tax professional for advice on Form 8938,it's thresholds and compliance requirements if the rules under IRC Section 6308D apply to you. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Wednesday, December 3, 2014

Learning The Mechanics Of A Foreign Tax Credit!

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Income tax systems that tax residents on worldwide income (such as the American tax system) generally offer a foreign tax credit to relieve a potential for double taxation. This credit is usually limited to the income attributable to foreign source income. 

What does this mean? If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. 

This means that, if taken as a deduction, foreign income taxes reduce your U.S. taxable income. Or if taken as a credit, foreign income taxes reduce your U.S. tax liability. One can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year-- as a foreign tax credit or as an itemized deduction. Also, one can change one's choice for each year's taxes. However, this choice applies to all foreign taxes paid or accrued during the year. 

For the purposes of this blog post, we will focus on the foreign tax credit. The foreign tax credit is taken on the Form 1116, Foreign Tax Credit. 

One can claim a foreign tax credit:
  • Only for foreign taxes on income, war profits, or excess profits, 
  • Or for taxes in lieu of these taxes. 
  • In addition, there is a limit on the amount of the credit that you can claim. You figure this limit and your credit on Form 1116. 
  • Your credit is the amount of foreign tax you paid or accrued or, if smaller, the limit.

Exemption from the foreign tax credit limit: This limit will not apply to you and you will be able to claim the foreign tax credit without the Form 1116 if the following requirements are met: 
  •  Your only foreign source gross income for the tax year is passive category income. (Passive Income is that from dividends, interest, rents, royalties, annuities and some net gains)
  •  Your qualified foreign taxes for the tax year are not more than $300 ($600 if married filing a joint return).
  •  All of your gross foreign income and the foreign taxes are reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT).
  •  You elect this procedure for the tax year. If you make this election, you cannot carry back or carry over any unused foreign tax to or from this tax year.

Foreign Taxes From A Partnership or S Corp: If foreign taxes were paid or accrued on your behalf by a partnership or an S Corporation, the foreign tax credit can be figured from some information from the Schedule K-1. 

Foreign Income Exclusion:  We talked about the ability to exclude your foreign income from taxation in this post. If you opted to exclude your foreign income, you cannot claim foreign tax credit on the same income. 

Tax Treaties:  The United States has tax treaties with various countries, in part to prevent double taxation of the same income by the United States and the treaty country. Certain treaties have special rules you must consider when figuring your foreign tax credit if you are a US citizen residing in that treaty country. 

Carryback and Carryover: If, because of the limit on the credit, you cannot use the full amount of qualified foreign taxes paid or accrued in the tax year, you are allowed a 1-year carryback and then a 10-year carryover of the unused foreign taxes.

Note: Do not forget that having passive foreign income maybe indicative of foreign bank accounts. In which case you have a responsibility to file FinCEN Form 114 and/ or Form 8938. More about these forms in my post here

These numbers are tricky and you may not be able to get the different and best options available to you even with an over-the-counter software in a box. Make sure you consult with an Enrolled Agent about the best option for you. 

Bibliography: Publication 514; Form 1116, Foreign Tax Credit; Form 2555; FinCEN Form 114; Form 8938

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Sunday, November 23, 2014

What If I Own Real Estate In a Foreign Country? Answers Here!

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There's this question that I always get from my clients: "Do I have to report my real estate holdings in a foreign country?" To which, my answer (in true accountant style) is always: "It depends". Let me explain further. 

You may be a first generation immigrant to the US and still have strong ties to your home country; by way of family elders who live there or a strong sense that you would like to some day retire back there, where you grew up. Or you are an adventurous investor who would like to invest in a little vacation home by the beach in the Caribbean. Or you were stationed abroad through your job and loved it so much that you invested in some property there. Then this blog is for you to read! 

The FATCA makes it mandatory for U.S. citizens, Green Card holders and foreign individuals with substantial presence in the US, to disclose all of their offshore holdings on their tax returns (via Form 8938), or on the FBAR, now known as Form FinCEN 114. Due to Inter-Governmental Agreements (aka IGA s), foreign financial institutions also disclose this information to the U.S. government. 

Bengaluru, Karnataka, India
Form 8938, Statement of Specified Foreign Assets, applies to foreign financial accounts, including stock in foreign companies and stakes in foreign business partnerships. So, what about your real estate holdings in foreign countries, do they have to go on these forms? 

If your foreign real estate holdings were held directly by you, then it is NOT a specified asset that needs to be reported on Form 8938, for example, your personal residence or a rental property.

Please do not stop here! Read On! 

A. If these real estate holdings were held by a foreign entity, such as a foreign corporation, partnership, estate or a trust, in which you have an interest, then ONLY the investment in this foreign entity must be reported on Form 8938, if the form thresholds are met. 

The value of this interest would be determined by the fair market value of the real estate holdings.

If point # A applied to you, there are other reporting requirements in addition to Form 8938. 

B. If the foreign property is in your name and is rented out, the rental income is to be reported on Schedule E of Form 1040.  The allowable expenses are the same as if the rental property was in the US, however, the depreciation is taken straight-line over a period of 40 years instead of 27.5 years. 

C. If the foreign property was inherited, if the inherited property was transferred to your personal name then it not a specified asset to be reported on Form 8938 unless the inheritance was an interest in a corporation, partnership or trust that held real estate. 

D.If the foreign property in your personal name were to be sold,   you will have to report short term or long term capital gains, as the case may be, via Schedule D to Form 1040 in the year the sale occurred. You may be eligible to get a foreign tax credit against your US taxes, if taxes were paid on the sale in the foreign country where the property was located. 

E.  If the foreign property was your personal residence, that is if you lived in the foreign property, 2 out of previous 5 years, immediately prior to the sale, you may be eligible for an exclusion on the sale- of $250,000 if filing as single or $500,000 if filing married & joint.

Agreed that owning property in a foreign country is not a walk in the park, but understanding the rules and regulations will keep you in compliance, and will make it manageable. Please make sure you completely understand your compliance requirements if any of the above apply to you. Better yet, consult an Enrolled Agent! 

Bibliography: Form 8938, Statement of Specified Foreign Financial Assets; Form 1040 & Schedules D & E; Internal Revenue Code § 121; Publication 946. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Sunday, November 16, 2014

"MyRa"...A New Retirement Buzz Word Or a Dud?

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President Obama signed a presidential memorandum in January of 2014 directing the Dept of Treasury to create "myRA". The memorandum states myRA to be a "a new simple, safe and affordable “starter” retirement savings account that will be initially offered through employers and will ultimately help low and moderate income Americans save for retirement". 

The proposal is that beginning in late 2014, with this retirement savings account  individuals will be able to open accounts and begin contributing to them every payday. myRAs will be initially offered through employers, balances will never go down, and there will be no fees. myRAs will hold a new retirement savings bond that will be backed by the U.S. Treasury.

The key features of myRA include: 

  • No cost to open an account.
  • Contribute to savings through regular payroll direct deposit.
  • Individual decides how much to contribute every payday ($50, $25, $7 – any amount!)
  • No fees.
  • myRAs will earn interest at the same variable rate as the Government Securities Investment Fund in the Thrift Savings Plan for federal employees.
  • myRAs will not be limited to one employer  – the account will be portable.
  • myRA contributions can be withdrawn tax free.
  • Earnings can be withdrawn tax free after five years and the saver is 59½.
  • Account holders can build savings for 30 years or until their myRA reaches $15,000 – whichever comes first. After that, myRA balances will transfer to private-sector Roth IRAs.

What Do People Think about myRA? 

According to the writers over at CNNMoney, there are people on both sides of the fence on this topic, there are those who do not want to "give a broke and bankrupt government any more money". And there are those who keep their modest savings in accounts yielding less than 1% returns, to them a 2% guaranteed return while saving for retirement is worth considering. 

 We can see that one can start small with this retirement account and that this might be a great tool for low, middle-income or part time employees to get started on the path to retirement. 

So how does myRA transition to the next step?  The total contribution to the myRA caps at $15,000. Once this happens, the balance is transferred to a Roth IRA. The balance however continues to grow tax-deferred till it is withdrawn just like any other IRA account. 

Retirement experts say that people who run their retirement calculations regularly tend to save more intelligently. And those who have a payroll deduction towards retirement are more likely to keep up with it. 

John F. Wasik, the author of "Keynes' Way to Wealth: Timeless Investment Lessons from the Great Economist, says in his article on, that retirement security is sagging and economic inequality is partially perpetuated by this country’s fractured retirement security policy. 

Although myRA offers a good opportunity to help people save for retirement without putting a lot of pressure on the current employer-based system and more mandates on small businesses, it remains to be seen how many sign up for this and can make a meaningful dent in the retirement-savings shortfall. 

Bibliography:; Keynes' Way to Wealth: Timeless Investment Lessons from the Great Economist; Center for American Progress;

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,