Post: #51

Richiavelli- great idea for a thread.

I have a question- I formed a single-member LLC for my business. It is my understanding I am not required to get an EIN for this arrangement, but that many banks will still require one in order to open an account for the business, and that it is generally a good idea. Is this the case?

Seems like you can get one instantly online at the IRS website but I just noticed this thread, and I figured I'll run it by a professional before doing so.

Thanks.

Post: #52

^ You have to get an EIN. If you don't, what is the purpose of forming the LLC?

It takes two minutes, here: https://sa.www4.irs.gov/modiein/individual/index.jsp

Also, depending in what line of business you are in, I recommend liability insurance. What is your exposure?

Post: #53

And since we were in the topic of depreciation, something that happens very often, specially with rental real estate properties, the taxpayer forgets to take depreciation. Sometimes the error is caught after the time limit to amend a past year return has expired (three years from the date of filing the return or two years after the tax was paid, whichever is later.)

There is something neat that allows the taxpayer to catch up with the depreciation, it is form 3115 "Application for Change in Accounting Method". The taxpayer can file this form to catch up the depreciation deduction missed, and take the deduction in one year. So, let's say taxpayer A acquired real estate in 1999 and lived in it until Feb 2003; at that moment put it in the market for rent and it has been his rental real estate since then (it doesn't need to be rented all the time, as long as the property is in the market, it is still considered income producing property.)

The property got depreciated for years 2003-2010, but then the taxpayer changed tax preparer and for whatever reason the depreciation was missed for 2011 on. Well here form 3115 comes to the rescue; the taxpayer realized earlier this year the mistake (missed depreciation deduction for 2011-2014) then he can file form 3115 and catch up the 2011-2014 depreciation on the 2015 tax return.

A simple example, a $100K basis asset, depreciates at $3,704/year in the incumbent years (rental real estate life is 27.5 years.) The taxpayer can deduct $18,520.00 as depreciation on the tax return of year 2015 ($3,704 x 5) That is not even counting if appliances were replaced, or if new carpets were installed, or whatever other improvements that depreciate at much faster rate.

Post: #54

This question is probably more legal than tax related. Just to be safe, I will consider any replies not as legal or financial advice, and treat them as entertainment or informative purposes only.

A couple years ago I lent a good friend a large sum of money.

He's now able to pay me back, and I'd like to know if there's any legal requirements, or standard bank practices I should be aware of.

Mainly I'm concerned about opaque, draconian finance laws that don't involve criminal activity, like structuring.

Is it easier if he paid me back in one lump sump? monthly? or am I safe as long as the payment isn't close to the reporting limits ($5000 or $10000)?

Thanks in advance, I do appreciate it.

Post: #55

(07-26-2016 06:05 PM)thoughtgypsy Wrote:  This question is probably more legal than tax related. Just to be safe, I will consider any replies not as legal or financial advice, and treat them as entertainment or informative purposes only.

A couple years ago I lent a good friend a large sum of money.

He's now able to pay me back, and I'd like to know if there's any legal requirements, or standard bank practices I should be aware of.

Mainly I'm concerned about opaque, draconian finance laws that don't involve criminal activity, like structuring.

Is it easier if he paid me back in one lump sump? monthly? or am I safe as long as the payment isn't close to the reporting limits ($5000 or $10000)?

Thanks in advance, I do appreciate it.

When you say large sum, how large? $15K? $150K?? Was anything documented? And did you charge interest? If you don't charge interest then the interest you should have charged, based on the AFR (IRS baseline rate for loans), could be viewed as being a "gift" in which case annual gift tax exclusions would apply. It probably wouldn't matter if it was a small loan.

https://apps.irs.gov/app/picklist/list/f...Rates.html

If you have it documented in some form I wouldn't worry about it. And banks can report you anyway, even if it's less than $10K. That's why it's the Financial Crimes Enforcement Network, not the $10K or the $5K Financial Crimes Enforcement Network.

Used to be 31 CFR 103, it has since been moved to 31 CFR Chapter X.
http://www.ecfr.gov/cgi-bin/ECFR?page=browse

§1020.320 Reports by banks of suspicious transactions.

(a) General. (1) Every bank shall file with the Treasury Department, to the extent and in the manner required by this section, a report of any suspicious transaction relevant to a possible violation of law or regulation. A bank may also file with the Treasury Department by using the Suspicious Activity Report specified in paragraph (b)(1) of this section or otherwise, a report of any suspicious transaction that it believes is relevant to the possible violation of any law or regulation but whose reporting is not required by this section.

(2) A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through the bank, it involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that:

(i) The transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation;

(ii) The transaction is designed to evade any requirements of this chapter or of any other regulations promulgated under the Bank Secrecy Act; or

(iii) The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction...

You can only imagine how many of these things they get every single day. You would be a tiny instantaneous blip on a giant radar screen scooping up every major transaction, hardly worth the effort of even the most minimal of investigations.

Post: #56

Hey all,

Tax season (in the U.S.) is upon us again, and I thought it wouldn't be a bad idea to bump this thread up. I was out having a beer earlier tonight with a forum member who is a prominent member of my city's RVF tribe, and I mentioned how I'd like to be less of a lurker and more of a contributor to our community here.

I'm a CPA who started my own tax preparation practice a few years ago, and I've serviced a few forum members in my city the last couple of years. In addition to bringing this thread alive again, I'd like to offer free thoughts/advice for any (U.S.) tax questions forum members might have throughout these next 2.5 months.

Just to be clear, because I know there are strict rules about solicitations, this is NOT an offer for me to be your tax preparer. I am NOT looking for clients on this forum. I'm simply offering those who might have a generic or non-complicated U.S. tax question a chance to get feedback for it from someone who does it for a living, as a way of giving back to the forum as best I can. Keep in mind that many questions are very specific and cannot be answered without actually examining your documents, so try to keep things general and simple if possible. You are welcome to private message me if you'd like, but I encourage you to keep questions out in the open in this thread so other people can potentially benefit.

I'll also post periodic tax tips for those who are interested. Happy Tax Season.

Post: #57

Today’s Tax Tip of the Day – For those of you still paying off your student loans, you can deduct up to $2,500 of student loan interest paid in any given year. To do this, your adjusted gross income cannot be more than $80,000 (single) and $160,000 (married filing jointly). You can only deduct loans if they were loaned to you from a qualified source (such as Sallie Mae or another private loan company), and borrowing from your parents or relatives isn’t eligible for a deduction.

Also, if you are a parent with a dependent in college, you should file your tax return as soon as possible. Taxpayers with college-age children need to get their tax information early to get the maximum amount of financial aid, and independent/graduate students need to do the same since the Free Application for Federal Student Aid (FAFSA) receives a student’s tax information directly from the IRS, eliminating the need for those students to provide it themselves.

Post: #58

Diop, what city are you in just curious?

I'll start, I have a s Corp and probably worked half w2 last year and half 1099. My income is over 100k. What's the best software to use for something like this? Last year I tried a software and it just wasn't working out, had to go see an "accountant".

Post: #59

Diop, I have a question. I got a head start and filed my taxes last year so I'm good right?

Post: #60

(01-31-2017 09:09 PM)doc holliday Wrote:  Diop, I have a question. I got a head start and filed my taxes last year so I'm good right?

Yup!

Doc I actually do need to chat with you sometime before March 15th

Post: #61

(01-31-2017 09:03 PM)NewDayNewFace Wrote:  Diop, what city are you in just curious?

I'll start, I have a s Corp and probably worked half w2 last year and half 1099. My income is over 100k. What's the best software to use for something like this? Last year I tried a software and it just wasn't working out, had to go see an "accountant".

New DayNewFace, I am in Chicago.

Were you planning to self-prepare? If so, TurboTax Business is (unfortunately) probably your best bet even for the S-Corp since it walks you through it. I've consulted for Intuit and have some experience with their programs, and they do miss a lot of stuff that requires a human being to tinker with to maximize deductions. It does make it very user-friendly though, which is helpful if you don't have a lot of experience with corporate tax return preparation. Not sure how much it costs, maybe around $200?

I've heard some good things about Tax Act Software, but haven't used it myself so I can't really say if I'd recommend it or not.

The program I use is called ATX, and in my opinion it's top of the line. There are other good programs out there as well, but this is my favorite one. Thing is, it's designed for tax preparers so it costs a boatload (almost $2K) and unless you are doing a ton of tax returns, it's not worth the money.

As much as I hate to endorse TurboTax, I'd say try the Business program first and see how you feel about it since it's probably your best bet for navigating through a complicated 1120-S return. Is this what you used last year?

Post: #62

Today’s Tax Tip of the Day – For pet lovers, if you foster a cat or dog while they wait for placement in a permanent home, you can deduct expenses such as litter, food, vet bills, paper towels, and possibly even your mileage to the vet. As long as the organization you’re helping out is a 501©(3) charity (which is nearly universal), these deductions can be itemized on your Schedule A.

Post: #63

Credit Karma is offering a free tax product for the first time this year, even includes state for free.

https://tax.creditkarma.com

I have run into a bug already though, 1099-B and 1099-OID are missing (even though they claim to support those forms).

Post: #64

Today’s Tax Tip of the Day – Your grandparents can lend you money to buy a home, start a business, or for any other purpose. Imputed Interest does not have to be reported on their tax return if the amount of the gift loan does not exceed $10,000, or if the amount of the gift loan does not exceed $100,000 and your total investment income for the year does not exceed $1,000. Important - always put any loan of this kind in writing to ensure the IRS sees it as a “loan” rather than a “gift”.

Also, payments by grandparents for grandchildren’s tuition and medical costs that are made directly to the provider (such as a university, school, hospital, or doctor) are tax free in any amount, and they don’t reduce the annual gift tax exclusion for the benefit of the grandchildren being helped.

Post: #65

(02-01-2017 12:30 AM)Diop Wrote:  

(01-31-2017 09:03 PM)NewDayNewFace Wrote:  Diop, what city are you in just curious?

I'll start, I have a s Corp and probably worked half w2 last year and half 1099. My income is over 100k. What's the best software to use for something like this? Last year I tried a software and it just wasn't working out, had to go see an "accountant".

New DayNewFace, I am in Chicago.

Were you planning to self-prepare? If so, TurboTax Business is (unfortunately) probably your best bet even for the S-Corp since it walks you through it. I've consulted for Intuit and have some experience with their programs, and they do miss a lot of stuff that requires a human being to tinker with to maximize deductions. It does make it very user-friendly though, which is helpful if you don't have a lot of experience with corporate tax return preparation. Not sure how much it costs, maybe around $200?

I've heard some good things about Tax Act Software, but haven't used it myself so I can't really say if I'd recommend it or not.

The program I use is called ATX, and in my opinion it's top of the line. There are other good programs out there as well, but this is my favorite one. Thing is, it's designed for tax preparers so it costs a boatload (almost $2K) and unless you are doing a ton of tax returns, it's not worth the money.

As much as I hate to endorse TurboTax, I'd say try the Business program first and see how you feel about it since it's probably your best bet for navigating through a complicated 1120-S return. Is this what you used last year?

I'll vouch for tax act if you are old school and like to look at tax forms vs. answer interview style questions. Thats why I like it.

Thanks for keeping the thread alive Diop!

Post: #66

Today’s Super Bowl Weekend Tax Tip of the Day – Tickets to sporting events can be tax deductible if the expense is either “directly related” to the active conduct of the taxpayer’s trade or business, or “associated with” the conduct of the trade or business.

An example of a “directly related” expense would be a photographer or journalist who earns income from selling photos or writing articles about a sporting event, and an example of an “associated with” expense would be a Hedge Fund Manager taking a prospective client to a game in the hopes of securing his business.

As long as the reasons for attending a sporting event represent an effort to obtain new business or strengthen existing business relationships, those expenses can potentially be deducted. As always, documentation must be kept as the allowable portion of these entertainment expense deductions is limited to 50% of their cost.

Post: #67

I have a separate Roth IRA, and am funding a post-tax 401k(non-roth). I'm not contributing to the pre-tax portion, only post-tax. My understanding is that when I leave I can roll the contributions from the 401k to the roth ira, and the interest from the post-tax portion can be transferred to a traditional IRA.

Does this strategy make sense, assuming that I don't want to contribute to both the pre-tax and post-tax 401k. Should I contribute only to the pre-tax, or vice versa?

Post: #68

^^
Does your 401(k) allow for Roth 401(k) contributions? If so, I would do that over the post tax 401(k). In the Roth 401(k), 100% of your contributions will grow and compound tax free, whereas in the post tax 401(k), only your contributions are able to be rolled into a Roth IRA, whereas the earnings get classified as traditional when rolling over. Sounds like you understand the idea pretty well.

$1,000 Roth 401(k) contribution that grows to $3,000 -> full $3,000 of post tax money that gets rolled into a Roth IRA.

$1,000 post tax 401(k) that grows to $3,000 -> $1,000 of post tax money that gets rolled into a Roth IRA, and $2,000 of pre tax money that gets rolled into a Traditional IRA.

In the situation above, the Roth 401(k) is superior. If that is an option in your plan, and your goal is to have all post tax money, then you are messing up. Usually plans that go so far to have the post tax option also have the Roth 401(k) option. If the Roth 401(k) isn't an option, and your plan is to have as much in post tax deferrals as possible, then you are doing it right.

If you are a high earner and are in the 25% + marginal tax bracket, then usually pre-tax is better, especially if you live in a state that has income tax as well. I am a big fan of using the pre-tax options, but everyone has different plans and strategies (so if you have state tax, use pre-tax to defer taxes now, and for tax planning move to a no tax state like Nevada or Florida years later and do your conversions there).

With a post tax 401(k) plan you have the ability to put away a little over $50k a year. I have never heard of anyone funding a post tax 401(k) first before filling up all other options. Usually you fill up the pre-tax 401(k) and / or the Roth 401(k) before contributing to the post tax 401(k).

Post: #69

I guess I failed to clarify that the plan does not offer a roth 401k, only the traditional 401k with pre and post tax options.

When I first set aside the contributions I thought the after tax was the same as a roth 401k, but I realized it wasn't. I haven't heard of anyone funding a post-tax one before a pre-tax either that's why I posed my question.

I am in a state with income tax, California.

Post: #70

Diop, wish I would've known you were in Chicago, I would've had you do my taxes. Next year for sure if you're taking on clients.

Could you explain deductions? I put 2 down for my W2 -don't recall if that's allowances or exemptions, this is a little out of my realm and owed the Feds $170.00ish this year.

I made $93,xxx and when I was doing my taxes on turbo taxes I claimed roughly $6,000 in deductions -union dues, clothes, boots, tools, etc. After I entered this in Turbo Tax it still showed I owed the Fed $170. I thought the $6,000 in deductions would lower my tax burden, but it did nothing.

Any feedback or explanation is greatly appreciated.

Post: #71

(02-05-2017 11:34 AM)Monty_Brogan Wrote:  Diop, wish I would've known you were in Chicago, I would've had you do my taxes. Next year for sure if you're taking on clients.

Could you explain deductions? I put 2 down for my W2 -don't recall if that's allowances or exemptions, this is a little out of my realm and owed the Feds $170.00ish this year.

I made $93,xxx and when I was doing my taxes on turbo taxes I claimed roughly $6,000 in deductions -union dues, clothes, boots, tools, etc. After I entered this in Turbo Tax it still showed I owed the Fed $170. I thought the $6,000 in deductions would lower my tax burden, but it did nothing.

Any feedback or explanation is greatly appreciated.

Hi Monty_Brogan,

For sure, if you need help next year just hit me up on here (hopefully this doesn't piss off the mods, I'm sincerely not trying to solicit for new clients with my posts).

What happened on your Federal 2016 return is that you entered deductions which are considered itemized, but they may not have exceeded the standard deduction which is $6,300 if you are filing as a single person. In other words, you would have to enter more than $6,300 in itemized deductions, otherwise it will default to the standard deduction since that is more beneficial to you.

Also, when it comes to Unreimbursed Employee Expenses such as the ones you entered, they are subject to 2% of your Adjusted Gross Income before they kick in and start to count against the $6,300 standard deduction. In other words, if your AGI is $93,000, the first $1,860 (2% of this AGI) of these expenses will not count towards your itemized deductions, only the amounts that exceed it. So even though you had about $6,000 in these unreimbursed employee expense deductions, only $4,140 are credited towards your itemized deductions, well below the $6,300 standard deduction.

Having said all this, I'm a little befuddled that your Itemized deductions didn't end up surpassing that $6,300 amount since they also include your State and Local Income taxes paid (in addition to a few other things, particularly if you are a homeowner). If you live in Chicago, we all know how high the state taxes are in this state so it seems like you should have exceeded this amount easily on your Schedule A. If you are married, the Standard Deduction doubles to $12,600 so perhaps this is the situation in your case, but you didn't mention that so I'm just speculating.

As far as payroll allowances are concerned, if you want to ensure that you will not owe taxes when you file next year just notify your payroll department that you want to change the number of allowances on your W4 to 1 or 0. The lower the number, the more taxes are withheld each paycheck, so you shouldn't have a balance after filing your 1040 in 2017 if this is what you prefer.

I'm happy to take a quick glance at your return this year if you'd like, just send me a private message.

Post: #72

(02-05-2017 12:20 PM)Diop Wrote:  

(02-05-2017 11:34 AM)Monty_Brogan Wrote:  Diop, wish I would've known you were in Chicago, I would've had you do my taxes. Next year for sure if you're taking on clients.

Could you explain deductions? I put 2 down for my W2 -don't recall if that's allowances or exemptions, this is a little out of my realm and owed the Feds $170.00ish this year.

I made $93,xxx and when I was doing my taxes on turbo taxes I claimed roughly $6,000 in deductions -union dues, clothes, boots, tools, etc. After I entered this in Turbo Tax it still showed I owed the Fed $170. I thought the $6,000 in deductions would lower my tax burden, but it did nothing.

Any feedback or explanation is greatly appreciated.

Hi Monty_Brogan,

For sure, if you need help next year just hit me up on here (hopefully this doesn't piss off the mods, I'm sincerely not trying to solicit for new clients with my posts).

What happened on your Federal 2016 return is that you entered deductions which are considered itemized, but they may not have exceeded the standard deduction which is $6,300 if you are filing as a single person. In other words, you would have to enter more than $6,300 in itemized deductions, otherwise it will default to the standard deduction since that is more beneficial to you.

Also, when it comes to Unreimbursed Employee Expenses such as the ones you entered, they are subject to 2% of your Adjusted Gross Income before they kick in and start to count against the $6,300 standard deduction. In other words, if your AGI is $93,000, the first $1,860 (2% of this AGI) of these expenses will not count towards your itemized deductions, only the amounts that exceed it. So even though you had about $6,000 in these unreimbursed employee expense deductions, only $4,140 are credited towards your itemized deductions, well below the $6,300 standard deduction.

Having said all this, I'm a little befuddled that your Itemized deductions didn't end up surpassing that $6,300 amount since they also include your State and Local Income taxes paid (in addition to a few other things, particularly if you are a homeowner). If you live in Chicago, we all know how high the state taxes are in this state so it seems like you should have exceeded this amount easily on your Schedule A. If you are married, the Standard Deduction doubles to $12,600 so perhaps this is the situation in your case, but you didn't mention that so I'm just speculating.

As far as payroll allowances are concerned, if you want to ensure that you will not owe taxes when you file next year just notify your payroll department that you want to change the number of allowances on your W4 to 1 or 0. The lower the number, the more taxes are withheld each paycheck, so you shouldn't have a balance after filing your 1040 in 2017 if this is what you prefer.

I'm happy to take a quick glance at your return this year if you'd like, just send me a private message.

Thank you for the very detailed response! I will shoot you a PM.

Post: #73

@ armogan

If you are in CA I'd go with the pre-tax. Will save you some money on state tax, and then if you want to convert to a Roth at a later point in time, do it after establishing residency in a tax friendly state...it's essentially tax arbitrage with state tax (you will pay federal tax on a Roth conversion regardless, but no need to pay state tax if you can avoid it).

After you max out the pre-tax 401k then you can start looking at the post tax space.

You don't want all your money locked up either, and nothing wrong with keeping money in taxable investment accounts. I used to max out every penny of tax sheltered space I could, but I have since pushed it way down and started focusing on building up a pot of gold that I can have easy and immediate access to.

Post: #74

I also have another pre-tax 401k account and roth 401k in another brokerage. Would it make the most sense to do the following:

1. Convert the roth 401k from that old brokerage to my main roth ira
2. Change my current contributions from post-tax to pre-tax 401k deferrals (avoid the state tax)
3. Roll the pre-tax 401k amount from my old brokerage to my current brokerage (the one with the post-tax deferrals)? Or should I just roll this amount in my main roth ira (pay the tax to convert)
4. Roll the post-tax amount of my 401k to the roth ira to consolidate balances (essentially amount funded before I switch contribution types)

Is there a time limit from when I can roll over amounts from old brokerages (Charles Schwab)? How exactly do you make a 401k to roth conversion (including paying the tax (e.g., is it done automatically or do I have to incorporate into my return)?

Post: #75

(02-05-2017 05:02 PM)Armogan Wrote:  I also have another pre-tax 401k account and roth 401k in another brokerage. Would it make the most sense to do the following:

1. Convert the roth 401k from that old brokerage to my main roth ira
2. Change my current contributions from post-tax to pre-tax 401k deferrals (avoid the state tax)
3. Roll the pre-tax 401k amount from my old brokerage to my current brokerage (the one with the post-tax deferrals)? Or should I just roll this amount in my main roth ira (pay the tax to convert)
4. Roll the post-tax amount of my 401k to the roth ira to consolidate balances (essentially amount funded before I switch contribution types)

Is there a time limit from when I can roll over amounts from old brokerages (Charles Schwab)? How exactly do you make a 401k to roth conversion (including paying the tax (e.g., is it done automatically or do I have to incorporate into my return)?

1) Rollover, not convert. Convert is changing tax classification, whereas rollover is keeping the current classification and moving to a new custodian (like from a 401K to an IRA). I like to rollover because I don't want to keep track of many different accounts, it just becomes too much to manage. Also, I feel more secure moving the money out of employer sponsored plans into my own IRA (I can pick the funds, and fees are generally cheaper). However, there are certain protections you could potentially give up if you roll over your 401(k) from an employer sponsored plan to an IRA. If you leave the money in an employer plan, it is covered by ERISA and has more asset protection from creditors and judgements, whereas an IRA is governed by state law and can be subject to a creditor's claim (it is vague if rollover money still keeps it's ERISA protection). In any case, I have never let the ERISA protection issue stop me from rolling over.

2) Yes.

3) Four choices here. 1 is do nothing. 2 is roll over to your current plan (assuming your current plan accepts rollovers). 3 is roll over to your IRA. 4 is rollover to your IRA and then convert to a ROTH and pay tax on the conversion.

I would probably do 3, but 2 is ok if your current employer plan is ok (most employer plans are not great when it comes to admin fees). If you convert to Roth while living in CA, you will pay CA tax. No need to convert today, do it years later. Move to NV, TX, FL (or another no tax state) and establish residency, and in a year when you have little income, do the conversion. Minimize taxes.

**Do you ever think you will be making a lot of money? Once you hit the modified adjusted gross income levels of $117,000 or higher, you cannot contribute to a Roth IRA. At that point you can only do a non-deductible IRA contribution and convert to a Roth IRA- aka the "backdoor Roth". However if you do this and you have pre-tax IRA money in any of your IRAs, you will get tripped up by the pro-rata rules and have to pay some taxes.

Translation- if you ever think you will need to do a backdoor Roth conversion, you do not want ANY pre-tax money in any of your IRAs, otherwise it will fuck with your conversion. If you think this is the path you will eventually go on, leave your pre-tax money where it is at, or roll your pre-tax money into your current employer sponsored plan. The pro-rata rules only look at IRA assets, not assets held in employer sponsored plans.

For me personally, I do not think I will ever need to do a backdoor Roth, so I have no problem rolling pre-tax money from an employer plan into an IRA, so don't let the above spook you away from doing it. You just need to be aware that if you do it, there could be unintended tax consequences years or even decades down the line.

4) Yes, you want to get that post tax money out of there AS SOON AS POSSIBLE. However, I do not think it will be possible for you. You most likely will have to sever employment to move the money. If that is the case, it is not the end of the world. Just leave it there, and move it when you sever employment at a later date.

Using the previous example from post above-
$1,000 in post tax money, with no growth, converted to Roth. Then years later grows to $3,000. All $3,000 is tax free money.

$1,000 in post tax account, and you stay employed and don't touch the money. Years later it grows to $3,000. You sever employment and roll the money into an IRA. Only $1,000 goes into the Roth, and the $2,000 in growth goes into the traditional IRA.

In both examples you had the same $1,000 and the same growth, but the first example is a clearly superior tax outcome.

5) There is generally no time limit. If you are no longer employed, you can move the money. I have let money sit for years and then move it. A pre-tax 401(k) conversion to a Roth IRA generally works like this-
1. open traditional IRA with broker of your choice
2. do a DIRECT ROLLOVER to the IRA. You will have to talk to the broker / custodian of assets on their process of doing a rollover
3. This one is broker specific so you will need to ask for the technical steps beforehand, but generally you open up a Roth IRA account and do not fund it with any money. Then instruct the broker to convert your IRA account (which you just funded with the rollover from your old 401(k)) to a Roth IRA.
4. You will get a 1099-R from the plan admin /TPA / recordkeeper for the employer plan showing a total distribution when you moved the money to the IRA. This is not taxable but is still reported on your tax return (you write "rollover").
5. The broker will also issue you a 1099-R for the conversion of the IRA to a Roth IRA. This will be taxable. If you converted a $30,000 IRA to a Roth IRA, you will have to pay taxes on this conversion when you file your taxes. At a high level simplistic view, if you have a marginal tax rate of 25%, you will have to pay an additional $7,500 in taxes when you file your tax return. This tax you pay is essentially the tax benefit you received / the tax you deferred when you made the initial contributions, and now that the funds are going from pre-tax to post tax, you have to give those taxes back. That is why it is always a good idea to do conversions in years when you have little to no income (so you pay less in taxes) and in a state with no income tax. It is foolish to do a conversion in a state with income tax or in a year when you made a lot of money.