Tricks for dealing with negative situations

M. asked me recently: How do you extract yourself from work drama? A work friend dragged me into one but I don't want to be in it. But I want to stay loyal to her.

M. doesn't want to be a part of the drama but wants to be loyal to her colleague. It sounds that M. doesn't want to take sides, but she wants to be liked by her colleague.

The main conflict here: M. wants to be liked but at the same time she wants to be herself by separating from other's opinions. Those two things are difficult to combine.  Difficult but possible.

I remember a situation when I was doing some rotations in Ireland as a medical student. The patient complained to me about the surgeon who was my supervisor. I couldn't really take anyone's side. By taking patient's side I would go against my boss. By taking surgeon's side I would go against the patient. Both could mean trouble for a medical student. 

A seasoned and very kind Irish nurse saw my helpless face, took me quietly to the side and told me: Don't take sides. Don't agree or disagree. Give some emotional support. Just say "Oh, dear, that is a terrible situation. I feel you."
I used it and indeed that was a neutral support phrase without making me to take any side.

Now I use it a lot at parties and weddings when people with not matching political views are passionately talking about recent political events. I have no goal or intent to change anyone's opinions or to convince them that they are wrong and I am right. Especially not at a wedding. 
Sometimes I don't even know who is wrong and who is right. 

They all can believe whatever they want. "Oh dear" and "I feel you" helps really me well.  I am not taking sides and at the same time I am not lying either. People like to talk and I let them talk. I might tell them what I think if they ask directly. But mostly I can redirect the question back to them, which is easy if you answer a question with another question.

Along the way I collected few more tricks about how to stay emotionally independent in "negative" situations.

1. Being able to listen to opinions different form your own, sometimes very different...

It is very helpful if you can listen to opinions of others which may be different and sometimes even the opposite of your own. When you start feeling inner diagreement, tell yourself: "It is not my way of thinking or doing things, but it sounds interesting" and after that just play a journalist and ask curious questions. Journalists don't necessary share the opinions and views of those they interview. But they still listen and ask questions.
Just because you don't argue, it doesn't automatically mean that you agree.

2. If you are pushed to an action, use a delay tactic
If someone asks you to make a decision on a spot, for example your financial advisor asks you to make a decision and you feel uncomfortable and are not ready to decide, just say: "It does sound very interesting. But I am not sure right now, I need more time to think about it." 
Some people may be very insisting and say: "What is there to think about?" You just repeat the same you just said: "As I just said, it does sound very interesting. But I am not sure right now, I need more time to think about it." You can repeat it indefinitely. They will feel a strong but polite resistance and will give up.

3. Be able to listen to critique without immediately fighting it 
Listen is the key word. You don't have to accept it. You can listen and evaluate if the advise is useful to you or not. 

Any unsolicited critique or advise is an attack. Use "marshal art" techniques to defend yourself. Step aside and let them fall. Say: "Thank you for you input, I appreciate it and I will think about it." Again, you don't agree or disagree and don't promice to change anything either.

4. Accept yourself as you are. 
With all your qualities. My parallel parking is pretty bad. Sometimes I get lost even with GPS. I get nauseated on roller coasters. 
There is no reason for me to hide that or to pretend to be stronger then I am.

If someone tells me: You can't park! I will answer: Yes, I can't park. And that is usually the end of the conversation. 

If someone who's definition of fun is a roller coaster ride will push me to "have fun" and to go on a roller coaster, it will be my own fault if I mess up the entire rest of my day after I get nauseated. 
Once you admit your weaknesses, life will become easier because there will be no more energy spent on pretending.


Have you noticed that none of the responses contain any lies or distorted truths. They are acknowledgment of received information, delaying of responses, or just acknowledgment of a fact without labeling the information as right or wrong. All of that is mainly avoiding or redirecting.

Tax advantaged accounts contribution changes in 2019

Contribution limits for 401k, 403b and most 457 plans are increased to $19,000.
For people over 50 - catch-up contributions are additional $6,000.

Traditional IRA and Roth IRA: $6,000.
For people over 50 - catch-up contributions are additional $6,000.

HSA: $3,500 for single and $7,000 for family.
For people over 55 - catch-up contributions are additional $1,000.

 

Gift tax - will it be ever applicable to you?

If you give a large cash gift to someone, it is useful to know the rules on taxation. The rules are very generous and it is very likely that you will never pay the gift tax. 

In 2019 the gift tax exclusion is $15,000 per person per year and $11,4 million per person per lifetime. A gift includes cash, stocks, real estate, land, vehicles.

Any gift below the exclusion limit doesn't have to be reported to IRS. 

Any gift above the exclusion will need the IRS Form 709 to disclose the gift at the time you file taxes.  Check if your state also requires you to report gifts over the limit (very few do).  
The person receiving the gift doesn't have to report the gift. 

If you give more than the limit, the amount over the limit will be recorded against the life time limit. So if you give your daughter $40,000 in one year, $15,000 will not be counted, and the sum exceeding that - the $25,000 will be reported and the records will be kept and will be counted against the life time limit. Later when she inherits your estate, her limits for estate tax will be lowered by that amount. 

If you (unlikely) use up your life time exclusions, you will have to pay the gift tax of 18%-40%. The person giving the gift will have to pay the tax.  

If gifted property is sold, a capital gains tax can be triggered.

If you add your child to your checking account, half of the money in the account will be considered a gift.

If you sell your relative a house below the market value, the difference will be taken out of the life time limit. 

Things that are not considered gifts:
- Anything given to a spouse (who is US citizen)
- Anything given to a dependent 
- Charitable or political donations
- Funds paid directly to medical service or health insurance provider, or funds paid directly to educational institutions (tuition only) on behalf of someone else


If you want to give someone a gift to help with education costs, you might give more than the yearly limit. The IRS allows taxpayers to give $75,000 into a 529 plan without paying tax or reducing the $11.4 million lifetime limit. 

What to do if your 60 days roll-over period is over and you still didn't finish the rollover?

There can be several reasons for the missed or prolonged rollover.

Not serious reasons

Forgetfulness, procrastination, laziness - nothing will help there. If you have no serious reason, you will have to pay taxes due and you will get them refunded after you file your tax return for that year.

Serious reasons
If one of the reasons below delayed your transfer, you can file the self-certification waiver which you will submit to the institution receiving the transfer. 

After 60 days allotted to the rollover are passed, the financial institution will not accept your rollover. 
The self-certification error is a form which you give to the institution to extend the rollover for another 30 days (safe harbor period for the reason stated in the form). 
The form is part of the IRS Revenue Procedure 2016-47 which you can google, download and fill out.  

To be granted the waiver you will need documentation supporting your claim that the rollover was not completed in time due to one of the qualifying reasons which are listed on the waiver page. 

   

Financial institution error

Copy and record the dates of all communications with both financial institutions. If the process takes too long you will have evidence that it was not your fault. 

It will not work if you wait with the initiating the rollover just one or two weeks before the deadline because it is obvious to anyone that such process may take longer than 2 weeks. Our rollover took 3 weeks (see the rollover update post here).  

Unusual circumstances

You have to have evidence that you were physically prevented from being able to complete the rollover.  Examples are severe home damage, serious illness (for example dementia or hospitalization), death in the family or of the person who is performing rollover, misplaced check or incarceration.

Postal error

Make sure to verify the address of the receiving institution before mailing the check. It is best to mail with tracking number. I used tracking number. The mail had 3 days delay for an unknown reason but I could follow the status every day.
Tracking also helped me to speed up the processes at the receiving institution. I emailed the customer service the day I saw that the letter was received and asked to process the transfer timely. I received an email response and the the transfer was processed on the same day.

Update on our 401k rollover - step by step

As mentioned before we decided to do a 401k rollover to IRAs do to a job change.

We decided to do trustee-to-trustee transfer (see previous post with specifics on how to do a rollover).


It is best to start early and plan the rollover in time where you will not travel much. There was a bit of hands on in our rollover process.


1. We called the previous employer 401k and requested a trustee-to-trustee transfer. 
They said that they only have one way they do it - issuing a check in the trustee name and mailing it to your address. That qualifies as trustee-to-trustee transfer because the check is in trustees name. 
They mailed us two checks, one for the Roth 401k portion and another one for the non-Roth 401k portion. 
It took about 7 days until we had the checks in our hands.


2. We called the receiving institution to verify the address to mail the checks to. 
They explained which form to fill out and to mail together with the checks. 
They also recommended to mail the checks in separate envelopes to avoid that someone might erroneously switch the Roth and non-Roth checks and and deposit the checks to wrong accounts. That was also my concern and I agreed.
We were also advised NOT to sign the back of the checks since the checks were issued to the receiving institution and not to us. 
It took us about 4 days including weekend.


3. We mailed both checks separately with tracking numbers. 
It took 7 days, 3 days longer then expected by USPS.


4. I was tracking the checks. On the day I saw that the checks were arrived, I emailed the receiving institution and asked them to perform a timely rollover. That was completed correctly on the same day and I received a confirmation email from them. 


It took about 3 weeks in all.

IRS wanted taxes on Back-door ROTH IRA conversions - They were wrong. What did I do?

In September I received a letter from IRS stating that I owe $7,000 in taxes on IRA distributions.

I didn't take any distributions!

The IRS letter stated that I took 3 distributions from my IRA, each of the distributions were $5,000.


The IRS was wrong on that. Those were not distributions, these were same year Back-door traditional IRA to ROTH IRA conversions.

You would think that IRS should know better. They have all information in their hands: my tax returns which clearly state each of the conversions and the 1099R forms from the broker which state that those were conversions. 
Why did they still sent me the letter?

They probably didn't bother to look at documentation. That is my guess because for anyone who will take a look at the tax return will see that everything is documented appropriately. And what about the corresponding 1099R forms they have received from the IRA broker? Maybe the broker didn't report the conversion?

I checked the accounts and it looked like the broker did report the conversion to IRS. All forms were on file.


Even if I knew that I was right, it was a bit stressful to see $7,000 in owed taxes in the IRS letter.

First I tried to look up online what others did in such situations. I could find only a few mentions on forums and blogs.  Most people called IRS and explained to the IRS person the issue on the phone. Some did mail documentation to them. Usually the issue was resolved.

What did I do?
Since it seemed that IRS already didn't do their diligence in checking the appropriate paperwork, how could I trust them to solve the issue on the phone? I wouldn't be able to document that phone call and anything they would tell me. In such an important issue I needed my own documentation.

I decided to mail in the supporting documentation without calling them. I mailed it with a tracking number and return receipt. $7,000 are worth that trouble.


My CPA wrote a detailed letter to the IRS and attached the copies of the tax reports with marks pointing exactly where the conversions were reported. 
I also attached the forms 1099R forms from the broker. The forms were available online so I didn't have to call the broker.

But I called them anyway and asked when do they submit those forms to IRS. The customer service representative said that the forms are automatically sent to the IRS as soon as  they are issued. 


The IRS gave me about 3 weeks to respond to their letter. I mailed the response in time. 
I was tracking my response letter and saw that it was received before the deadline.

Two weeks after that I got a letter stating that they have received my response and are working on it.
Then one month later another IRS letter arrived which stated that the issue was resolved and I owe no taxes.