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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10158
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I'm self employed, sole proprietor, one man business. I'm

Customer Question

I'm self employed, sole proprietor, one man business. I'm 59-1/2 in July, 2017.
In 2016 I expect to earn $100K and in 2017 I expect to earn around $50K.
On 4/4/17 I contribute the maximum contribution **FOR 2016 TAX YEAR** to my Sep IRA. Let's say that comes out to $15K. Then in July, 2017 (on the day after I turn 59-1/2) I withdraw the same amount of money from my Sep IRA (let's say $15K) and this becomes a **2017 TAX YEAR** WITHDRAWAL.
As far as I can tell this will save me taxes by pushing my taxes on the $15K from a higher tax year (2016) to a lower tax year (2017). The only downside I see is I lose control of the $15K for around 3 months.
Am I missing something here or will this strategy work?
Submitted: 3 months ago.
Category: Tax
Expert:  Lane replied 3 months ago.

Hi. My name's Lane... I can help you here.

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Absolutely, this certainly works. It's just the coincidence of your income dropping as it will, and the ability to pull without the 10% penalty, that's working for you here.

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This is one of the items on a checklist I have for my business owner clients to watch, in ANY year where (1) income disparity is this much, and (2) they are past age 59 and 1/2.

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. … Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.