THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2025 67 being filed, however, may be removed without penalty by the filing due date (with extensions) of the tax return. Contributions to a 401(k), TSP, or 403(b) plan may be made only via payroll deductions, the last of which is possible during the last pay period paid by Dec. 31, 2024. MFJ self-employed spouses working outside the United States who elect the FEIE can make a spousal Roth or Traditional IRA contribution as permitted by income thresholds. Taxpayers with modified AGI above the permitted Roth contribution threshold may want to consider a back-door Roth contribution strategy. In 2022, Congress considered legislation to eliminate back-door Roth contributions and Roth conversions. While this proposed legislation appears to have stalled in Congress, it could be reconsidered in future legislation. The Consolidated Appropriations Act (which included the SECURE 2.0 Act) made some additional changes to retirement plans: • Increases the age for required mandatory distributions (RMD). For 2023 through 2032, the RMD age is 73 and then changes to age 75 after 2032. • Beginning in 2025, taxpayers between ages 60 and 63 can make a catch-up contribution of up to $11,250. Taxpayers between ages 50 and 59 or 64 and older can make a catch-up contribution of up to $7,500. • Allows beneficiaries of 529 college savings accounts to roll over up to a total of $35,000 from a 529 account that has been open more than 15 years to their Roth IRA starting in 2024. Readers should review all available IRS guidance before initiating a 529 plan rollover to ensure all requirements are met. • The excise tax if a taxpayer does not take the RMD is reduced from 50 percent to 25 percent of the amount that the RMD amount exceeds the actual distribution in a given year. If the taxpayer corrects the failure to take the correct RMD amount in a timely manner (within two years), the excise tax is reduced to 10 percent. • Provides new exceptions after Dec. 31, 2023, to the 10 percent early withdrawal penalty for distributions of up to $1,000 per year for emergency expenses (unforeseeable or immediate financial needs for personal or family emergencies) and for certain victims of domestic abuse who withdraw the lesser of $10,000 or 50 percent of their account (subject to self-certifying requirements). Readers should review the various IRS FAQs for the Secure Act 2.0 topics and other IRS information (including IRS Notice 2024-02) before initiating a withdrawal under these exceptions. • As of Jan. 1, 2024, owners of Roth employer retirement plan accounts (such as the ROTH TSP) are no longer required to take required minimum distributions.
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