401(k)s
Hardship distributions from 401(k) plans made after 1998 can't be rolled over into traditional IRAs (individual retirement accounts). For more, see Publication 590, Individual Retirement Arrangements, at http://www.irs.gov/forms_pubs/pubs/p590t...
After the 1999 tax year, you also cannot conduct five-year forward averaging for figuring the tax on a lump-sum 401(k) distribution. For more on how this worked, take a look at "Attention Retirees-to-Be..." Other options for calculating taxes on these distributions are explained in Publication 575, Pension and Annuity Income, at http://www.irs.gov/forms_pubs/pubs/p575t... (See "Taxation of Nonperiodic Payments.")
IRAs/Roth IRAs
As of tax year 2000, there's no more "bouncing" allowed between traditional IRAs and Roth IRAs and back again. In 1998 and 1999, you could convert an amount from a traditional IRA to a Roth IRA, transfer that amount back to a traditional IRA, and then reconvert back to a Roth IRA. After 1999, you cannot convert and reconvert an amount during the same taxable year, or if later, during the 30-day period following the reconversion. This is explained in Publication 590, Individual Retirement Arrangements, http://www.irs.gov/forms_pubs/pubs/p590t...
For 1999, if you were covered by a retirement plan at work [such as a 401(k)], your deduction for contributions to a traditional IRA will not be phased out unless your modified adjusted gross income is $51,000 to $61,000 for a married couple filing jointly, or $31,000 to $41,000 for singles or heads of households. Again, see Publication 590, Individual Retirement Arrangements, (http://www.irs.gov/forms_pubs/pubs/p590t... for more.
The Self-Employed
For tax year 1999, self-employed individuals can now deduct 60% of premiums paid for personal or family medical insurance. And good news -- the deduction increases once again in 2001. For more information see Publication 535, Business Expenses, (http://www.irs.gov/forms_pubs/pubs/p535t... Chapter 10.
In addition, maximum annual earnings subject to the Social Security tax rises to $72,600 for 1999, and $76,200 for 2000.
Some Future Possibilities...
The US House of Representatives recently voted to no longer penalize the Social Security benefits of those between ages 65 to 69 who earn more than a certain amount. Though the measure still needs to hurdle the Senate, the tight labor force -- which is begging for workers of most ages and many occupations -- should offer support to the measure.
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