The difficult period we are experiencing as a result of the COVID-19 pandemic has a related, unsavory aspect: It has opened an opportunity for scammers to take advantage of people, especially seniors.

Criminals are even stealing Economic Impact Payments. EIPs are stimulus payments made available by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27.

Seniors are targeted more than others. If you yourself are a senior, or know someone who is, it’s important to know what to expect.

First, beware COVID-related phishing schemes. Watch out for emails, letters, texts and links that use keywords such as “coronavirus,” “COVID-19” and “Stimulus,” warned the IRS in a release issued July 16 (“IRS unveils ‘Dirty Dozen’ list of tax scams for 2020”).

“These schemes are blasted to large numbers of people in an effort to get personal identifying information or financial account information,” said the IRS. “Most of these new schemes are actively playing on the fear and unknown of the virus and the stimulus payments.”

Second, if you are charitably inclined, be alert to fake charities related to the COVID-19 pandemic. These schemes “normally start with unsolicited contact by telephone, text, social media, email or in-person using a variety of tactics,” according to the IRS. “Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information. They may even claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.”

If you want to contribute to a cause, look up the charity to make sure it is legitimate. You can use the search tool on IRS.gov (tinyurl.com/y84b96ja). Scroll down the page until you see the “Tax Exempt Organization Search” blue box. Clicking on it will give you search parameters for finding an organization by name or by Employer Identification Number (EIN). From there you can determine if the charity is legitimate.

Third, watch out for telephone scams, or “vishing” (voice phishing). The scam calls can threaten arrest, deportation or license revocation if the victim doesn’t pay a bogus tax bill. They often take the form of a “robocall” (a text-to-speech recorded message with instructions for returning the call).

If the caller says he or she is from the IRS, be on the alert. The IRS will “never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or EIP,” said the IRS.

Fourth, if you, or someone you know, live in a retirement community or a nursing home, have you received your EIP?

In a June 16 alert to nursing homes and other care facilities (tinyurl.com/yc5p8aaq), the IRS stated that others might take advantage “of vulnerable populations who received the EIPs.”

These are only a few of the types of situations seniors need to be aware of. Read about the “Dirty Dozen” tax scams for 2020 at tinyurl.com/y22l6nl5.

I also recommend watching this video: “Pick Six to Stop COVID-19 Fraud,” prepared by the U.S. Attorney’s Office, Northern District of New York: tinyurl.com/yy42jf7x.

Another resource is “Taxpayer Guide to Identity Theft” (tinyurl.com/yd56ytru) and “Coronavirus Tax Relief” (tinyurl.com/ukv9vkh), both found on the IRS website.

If you are the subject of a coronavirus-related scam, contact the National Center for Disaster Fraud (NCDF) Hotline at 1-866-720-5721. The NCDF is an agency within the Department of Justice’s Criminal Division.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Last week, we talked about this year’s July 15 deadline for 2019 IRA contributions. July 15 is also an important date for “backdoor” Roth conversions for people who don’t qualify for Roth contributions.

That is, if you haven’t made your 2019 IRA contribution, and you don’t qualify for a Roth contribution due to income limits, consider doing a backdoor Roth for 2019 and, while you are at it, do one for 2020. That way, you can contribute a maximum of $6,000 ($7,000 if you are 50 or older) for each tax year, for a total of $12,000 ($14,000).

When you convert, you will have to pay taxes on the amount converted, except in a special situation that I’ll describe shortly.

What’s “backdoor” about the conversion?

If you earn over a certain dollar amount, you cannot make a direct Roth IRA contribution. The back door is a contribution to a traditional IRA followed by a conversion to a Roth.

What are the income limits that prevent a direct contribution to a Roth? That depends on your filing status.

For example, if you are single with a modified adjusted gross income (MAGI) of $137,000 or more (2019), then no Roth contribution for you. The max for 2020 for single filers is $139,000. The limits are higher if you are married and filing jointly ($203,000 for 2019 and $206,000 for 2020).

Limits are published in IRS Pub. 590-A, which you can read online at irs.gov/pub/irs-pdf/p590a.pdf.

Why would you want a Roth? Roth IRAs are tax-free, not tax-deferred. There are no required minimum distributions (RMDs) during your lifetime. And when you withdraw the funds (after age 59 ½ and a holding period of five years), there is no tax bill. In the ideal case, the backdoor Roth can even be tax-free.

Take this example: John, age 52, is single. He earned $160,000 in 2019 and expects to earn about that amount or more in 2020, which means his income is above the limit for Roth contributions.

He cannot contribute to a Roth, but he can contribute to a traditional IRA. He has made no 2019 or 2020 IRA contributions to date, and in fact does not have an IRA. He wants to maximize his Roth opportunities.

John opens up a traditional IRA at a brokerage firm, as well as a Roth IRA. He contributes nothing to the Roth. He contributes $7,000 to the traditional IRA for the 2019 tax year before July 15. At the same time, he contributes $7,000 to the traditional IRA for the 2020 tax year.

He can do these contributions because there are no income caps on traditional IRAs. The Roth IRA he opened is not funded -- yet.

But now that he has $14,000 in his traditional IRA, he directs the brokerage firm to convert his traditional IRA to a Roth IRA. In this very limited example, the conversion is tax-free.

If John had other traditional IRAs, he would have to pay taxes on the conversion because of “aggregation” and “pro rata rules.”

Here is how Fidelity describes these rules:

“When it comes to conversions ... the IRS views all of your traditional IRAs as one account. If you have three traditional IRAs and a rollover IRA spread across different financial institutions, the IRS would lump all of them together.”

The accounts are aggregated and the conversion must be done pro rata -- “proportionally split between your after-tax and pre-tax balances, including contributions and earnings,” according to Fidelity.

It might be clearer to see an example of this in action, which you can find here: fidelity.com/viewpoints/retirement/earn-too-much-contribute-Roth-IRA-conversion.

In any case, now is a good time to fund a Roth IRA, either through the back door or directly if you qualify.

For more reading on backdoor IRAs, a good resource is forbes.com/sites/jimwang/2020/02/20/supercharge-your-retirement-savings-with-a-backdoor-roth-ira/#5753a74a8f08.

July 15 is almost here, so make sure to take care of your 2019 IRA contributions -- and your 2019 income tax return -- before the deadline.

For a quick video that covers the topics we’ve discussed in today’s column, go to vimeo.com/437251929.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

If you have not made your 2019 IRA contribution yet, you are not alone. According to Fidelity Investments, the nation’s largest IRA provider, an increasing percentage of investors are making contributions to their IRAs during the last three weeks before the tax deadline -- this year, that deadline is July 15.

Due to the COVID-19 pandemic, both the IRA contribution deadline and the 2019 tax filing deadline were postponed to July 15. The July 15 date is good for this year only. Normally, the cutoff is April 15 for contributions for the prior tax year (and for filing your prior year’s tax return).

More than a third (34%) of tax season contributions came in right before the tax deadline in 2019, according to Fidelity. In May of this year, almost 51,000 clients made prior-year contributions to an IRA.

Let’s go over some IRA basics. For details, I highly recommend reading the official source: IRS Publication 590-A “Contributions to Individual Retirement Arrangements (IRAs) for use in preparing 2019 Returns” (tinyurl.com/jortqhl).

Starting in 2020, as long as you are still working, there is no age limit to be able to contribute to an IRA, thanks to the SECURE Act, which was signed into law in 2019. Before this change, the age cutoff was 70½. By the way, if you visit an IRA custodian website to do your research, be aware that some have not been updated to reflect this and other changes as a result of the CARES Act, which became law on March 27, 2020, and the SECURE Act.

Who can set up or contribute to an IRA? In general, anyone who earns money through a gig or a job can contribute to an IRA.

How much can you contribute to an IRA? The maximum you can contribute for 2019 is $6,000 ($7,000 if you are 50 or older).

What type of IRA is best? Most taxpayers have two choices: either a traditional IRA or a Roth IRA.

The important difference between the two types of IRAs has to do with taxes. Traditional IRAs are tax-deferred (meaning you pay taxes later when you start taking withdrawals). Deferrals don’t last forever -- withdrawals are mandated after age 72 (called “required minimum distributions,” or RMDs), and subject to severe penalties if not taken on time and in the right amount.

Roths are tax-free. That is, unlike the traditional IRA, “qualified distributions” are income-tax-free. Like the traditional IRA, no income taxes are triggered by income earned or capital gains realized during the time you own the IRA. Unlike traditional IRAs, the owner of a Roth IRA is not subject to RMDs (though beneficiaries of inherited Roth IRAs are subject to RMDs).

Can you get an income tax deduction? When you contribute to a traditional IRA, your contribution could be tax-deductible and also benefit from a tax credit, but only if you fall under IRS income limits. I must admit that I have to look up those limits every time I’m dealing with the subject, and I recommend you do the same. They change over time.

You’ll find both 2019 and 2020 limits in the most recent IRS Pub. 590-A (for 2019). The limits for deductibility are tied to your income and tax status (filing jointly with your spouse, filing separately, as head of household or individually), and whether you are covered by a 401(k) or other retirement plan at work.

There are also income limits on who can contribute to a Roth IRA, but as of a few years ago, there are no income limits that prevent you from converting from a traditional IRA to a Roth.

From my perspective as a personal money manager to high-net-worth families, I like to see people saving as much as possible -- maxing out their 401(k)s at work and their IRAs as well. While you are making your 2019 contribution, think about making your 2020 contribution as well, but be sure to notify your custodian of the tax year that applies to each contribution. The maximum you can contribute for 2020 is also $6,000 ($7,000 if you are 50 or older). That means if you haven’t done your 2019 contribution and wanted to maximize your savings, you could contribute a maximum of $6,000 per tax year ($12,000 for both years or $14,000 if you are 50 or older).

Send me questions about IRA contributions that I can answer in the column by emailing me at readers@juliejason.com. Please remember to tell me the city and state you are writing from, and the name of your newspaper.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION