One of the hottest topics this year is Roth IRA's. The reason, of course, is that this is the year when anybody, regardless of income, can roll over their regular IRA into a Roth IRA. Recently, I received the following question from one of our School of Tax Strategy students:

Q: Tom, I have some Roth Questions. I am under the understanding that there are several different types of ROTH accounts. I want to open an account for my son who is 11, but I want the account to be able to be used for investing in realestate, tax liens, businesses and what ever else comes up, without having to pay taxes on the monies taken out at retirement. How do I know if it is the correct type. Also, I have heard that there are education accounts that can be used for investing and are good tax for not having to pay taxes for education upon taking out the money for education. Thanks, Perrilee

A: There is only one type of Roth IRA account. Just be sure it is held by a custodian who allows you to make decisions on a regular basis. Some people call this a self-directed IRA, though it's still just a normal Roth IRA.

Think twice about what you are going to invest in through your son's Roth IRA. My advice is never to have a tax shelter within a tax shelter. For this reason, I don't like to see investments in rental real estate made in a Roth IRA. Start by determining your wealth strategy. Until you know what your strategy is for building wealth, it doesn't make sense to start investing. For more info on building a wealth strategy, go to our School of Wealth Strategy at http://www.provisionwealth.com/products.

As for the educational IRA's, I don't like them. Too many restrictions. Stick with the Roth IRA or other investment options that you decide upon with your Wealth Strategist.

Warmest regards,

Tom

Our most recent School of Tax Strategy teleconference call was a huge success. Many great questions and a high volume of participants. Some of our students had additional questions they sent to us following the call. One of them regards the new law on 1099's. Here is the issue and the answer:

Q: Historically, businesses have been required to issue a form 1099 to every individual or partnership to whom they paid over $600 for services. The Health Care Reform Act changed this requirement to cover more payees and more payments. What are the exact rules now?

A: Beginning in 2012, businesses will have to report all payments to any single person, including an individual, partnership, LLC or corporation where the total of the payments made to such person during the year for either services or property exceeds $600.

This is a huge change from current law, since now property is covered. This means that if you purchase a computer from Best Buy, you will have to send Best Buy a 1099. There have been several attempts to change this law already and there are hopes it will change prior to 2012 when it becomes effective.

Warmest regards,

Tom