Sean Mullaney is an advice-only financial planner and the President of Mullaney Financial & Tax, Inc. Through Mullaney Financial & Tax, Sean provides advice-only financial planning for a flat fee. He is the co-author, with Cody Garrett, of the book Tax Planning To and Through Early Retirement. Sean writes the Plutus Award winning blog FITaxGuy.com on the intersection of tax and financial independence. He also has a personal finance YouTube channel.
Sean has discussed personal finance and tax on numerous podcasts, including ChooseFI, The Long View, Motley Fool Money, and BiggerPockets Money. He has been quoted in media outlets including The Wall Street Journal, The New York Times, and MarketWatch.
Sean entered financial planning as a career changer. In his previous career he worked for Deloitte & Touche and PwC, including over 6 years in PwC’s Washington National Tax Services practice. Sean is a Certified Public Accountant licensed in California and Virginia. He is a member of Measure Twice Planners and the American Institute of Certified Public Accountants. For more on Sean’s professional background, please visit his LinkedIn profile here.
Sean and his wife Catherine live in Woodland Hills, California. Outside of professional pursuits, he enjoys spending time with his wife, travel, the comedy of Larry David and Jerry Seinfeld, and New York Jets football.
You can follow Sean on X here.
Mullaney Financial & Tax, Inc. (“MFT”) is an accountancy corporation licensed by the California Board of Accountancy and is a registered investment advisor registered with the state of California. Sean Mullaney is the investment adviser representative of Mullaney Financial & Tax, Inc.
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All written content on this site is for information purposes only. Opinions expressed herein are solely those of MFT, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
enjoyed your QBI posts…..thanks!
Thanks for appearing on the “how to money” podcast. Didn’t expect to enjoy tax talk as much as I did.
Hi Sean,
Hope all is well!
Could you add our podcast interview as well?
https://www.inspiretofire.com/the-power-of-the-roth-ira-for-financial-independence/
I enjoyed our tax talk and it’s been one of the most popular episodes to date!
Thanks again,
Chris
Hi, Love all the tax information you provide, thank you! In the article, “THE SOLO 401(K) TRAP” shouldn’t we also consider the value of the premium health tax credit and how reducing MAGI via traditional solo 401(K) contributions could increase the amount of premium health tax credit? It’s not just about the QBI deduction, right? Would a higher premium health tax credit “balance out” the value lost you discussed in the article? What are your thoughts?
Tricia, thank you for reading and commenting. I appreciate it.
You’re absolutely correct that those on ACA plans should consider the PTC when assessing a Solo 401(k). It’s a multi-variable calculus, no doubt. I wrote about using Solo 401(k)s to reduce one’s MAGI for Premium Tax Credit purposes here: https://fitaxguy.com/three-ways-the-solo-401k-supports-financial-independence/
Thanks for the article on Section 199a dividends. Can you confirm that there are no benefits to having section 199a dividends if your REIT security is in an IRA, rather than an after-tax account?
Thank you for reading and commenting. I can’t say there are no benefits to having a REIT in a traditional IRA (tax deferred growth would be a benefit), but there are no QBI benefits to holding a REIT inside a traditional IRA. A REIT dividend withdrawn from a traditional IRA will be subject to 100% ordinary income tax, while a REIT dividend received from a taxable brokerage account will (effectively) be subject to an 80% ordinary income tax. Two caveats though: 1) the taxpayer (generally speaking) gets to choose the timing of the taxation of a REIT dividend in a traditional IRA. They can take it out when they want to (subject to the RMD rules) while taxpayers do not get to choose the timing of dividends paid in taxable accounts and 2) at higher incomes, REIT dividends in taxable accounts are subject to the net investment income tax, while traditional IRA withdrawals are not subject to the net investment income tax.
The above said, there are many factors that go into investment allocation and tax basketing. Losing the QBI deduction by holding REITs inside a traditional IRA is one of many factors to consider.
Hi Sean, do you have any information/tax strategies for very high income earners (over $500k)? Done all the usual stuff above in addition to cash balance plan, but still huge tax bill. Any articles on this or suggestions? Thanks.
Hi Sean,
I’m a slightly late starter, 41, physician. I just found out my job offers Roth 403B as well as traditional 403B. I’m having a hard time doing backdoor Roth because I have traditional IRA and SEP. my jobs 403B Roth is not income based, I can contribute 23K between the 2 accounts whatever percent split I want, they do 6% match which goes pre tax. Is there any benefit to doing some money in the Roth or should I keep all of it pre tax? If you think Roth is a good idea how should I decide the split? This year maxed pre tax. Thanks for your help. I do have quite a bit saved between traditional IRA, one Roth, SEP, 401K and taxable brokerage so not sure I truly count as late starter.
Beth, thanks for commenting. Unfortunately, I cannot provide advice to individuals with respect to specific situations on the blog.
Hi Sean,
I have a question. Physician, 41 outside income limits for Roth. I just found out my job has a 403B Roth not income based. I was having a hard time with backdoor Roth because I have traditional IRAs and SEP, etc. I can contribute max 23K between pre tax and Roth and divide any way I want. Do you have any advice, especially for those whom it’s difficult to set up backdoor roth
Hi Sean,
Great article: https://fitaxguy.com/roth-401ks-and-the-rule-of-55/
This paragraph is from the above article:
Ted leaves Maple Industries at age 56. He withdraws $60,000 from his Maple Industries Roth 401(k) at a time it was worth $300,000 and had $120,000 of previous contributions. Forty percent of the withdrawal ($24,000) is a tax and penalty free return of contributions. Sixty percent of the withdrawal ($36,000) is penalty free under the Rule of 55 but is subject to income taxation.
My question is, If Ted had Roth 401k open (in Maple Industries) for at least 5 years (all other facts remaining the same), wouldn’t the earnings portion ($36,000) of the withdrawal be tax free ?
Thanks again.
Thanks for commenting and the kind words. To be fully income tax free, the distribution must be a qualified distribution. The 5 year rule is a necessary, but not sufficient, rule to meet in order to be a qualified distribution. Since Ted is not 59 1/2, he can’t take a qualified distribution, generally speaking. So adding the 5 year plus holding period is irrelevant for Ted at this point.
Hi Sean,
I am sorry, I found the following statement in this Fidelity article which probably threw me off (link -> https://www.fidelity.com/learning-center/smart-money/roth-401k-vs-roth-ira)
“If you part ways with the company sponsoring your Roth 401(k) after you turn 55, you can access its contents for an early withdrawal penalty-free. You can also avoid taxes, if you first contributed to a Roth account at least 5 years before.”
Am I reading it wrong?
Thanks again.
I’m not fond of the wording on that website. Having had a particular Roth 401(k) for 5 years is not sufficient to use the Rule of 55 to avoid income taxation. The Rule of 55 only addresses the 10% early withdrawal penalty. What that second sentence appears to reference, in a less than precise manner (IMO), is withdrawing from Roth IRAs. You can review Q&A 2 and Q&A 3 of this regulation for the taxation of Roth 401(k) withdrawals: https://www.law.cornell.edu/cfr/text/26/1.402A-1
Thank you so much, Sean
Your advice on 199a dividends is incorrect. There is an income test. Too much income can mean no tax credit.
Please see Section 199A(b)(3). https://www.law.cornell.edu/uscode/text/26/199A#b_3
The taxable income limit is specifically tailored to apply to limit the potential QBI deduction coming from qualified trade or business. Section 199A dividends do not come from a qualified trade or business of the taxpayer, rather they come from REIT investments owned by the taxpayer. Further, the specified service trade or business taxable income limitations (199A(d)(2)) do not apply to Section 199A dividends.
There is no income test for taking the QBI deduction for Section 199A dividends.
Hey Sean – Really appreciate the info on the 72(t). There is just one thing I wanted to follow up on regarding the 72(t). One you start the 72(t), it needs to be in lockdown where you can’t add any more money and can only take out the equal payments, but can you still change your investment allocations within the 72(t) IRA at any time. For example, can I sell my Apple stock and buy Microsoft stock, or change from a 70/30 stock/bond to a 60/40 stock bond allocation within the fund, and long I’m not contrubiting more money are changing distributions without incurring the 10% penalty. I am guessing the answer is yes because you have to sell equities for the distributions but wanted to double check. 🙂
The Feedburner / “subscribe by email” box is broken so I can’t subscribe to receive your awesome content. 🙁
Hi Sean, enjoy your content and have also read your book on Solo 401k and seen a number of your Youtube videos. I am a fellow CPA and solopreneur and wanted to mention to you that while I hear a lot of folks discuss the 72t in the context of early retirement, I wanted to also share another perspective on when it might be a strategy to consider.
The additional circumstance where a 72t might be a strategy to consider is people like the two of us whereby we are solo entrepreneurs with access to a Solo 401k, particularly those making a midlife career change, again, just like the two of us. Given how high the 415(c) limit is (and continues to index with inflation), annuitizing your Traditional IRA from previous employers not only allows you to cushion your income if needed while making a career change to grow your own business, but it also provides valuable additional capital to fully utilize the power of the Solo 401k contribution limits, including the Mega Backdoor Roth.
What are your big picture thoughts on a 72t combined with Solo 401k strategy for someone making a midlife career change? Thanks.
Greg, thank you for commenting. You will be happy to know that my soon to be published book, Tax Planning To and Through Early Retirement, co-authored with Cody Garrett, has very specific thoughts on (1) when to start a 72(t) payment plan and (2) combining the Solo 401(k) and the Mega Backdoor Roth IRA. For now, I can share a YT video I did on combining the Mega Backdoor Roth and the Solo 401(k): https://www.youtube.com/watch?v=ULlEcKEKD9c
Mr. Mullaney,
I have just read your tax 2025 Year End Tax Planning article linked through my Choose FI email and am intrigued.
I wonder if I may ask a question.
My husband and I underestimated our income for 2025 – the first year we’ve been on the ACA.
We are anticipating up to a $30,000 tax bill for 2025 to pay back the premium tax credit we received.
Is there any way to avoid/lessen that at this point?
We would happily create a DAF and give to our church, if that would be doable.
My husband is self-employed and I work part-time.
It sounds like our premiums could be tax-deductible, which is good, but that will make a very small dent in the bill, since our premium was generously subsidized for a family of 5.
Any advice would be so appreciated and we would be happy to pay for any service or person you think could help us.
Thank you.
Carrie, thanks for reading the article and commenting. I appreciate it.
Understand I cannot provide any specific advice to you or anyone else in the comments. But what I can do is provide some academic commentary. People like you have two considerations. One is lowering federal income tax (and possibly state income tax). The second is increasing the Premium Tax Credit. You mentioned self-employment income — that’s an opportunity for deductions to a Solo 401(k) (potentially for both employee and employer contributions) that can lower 2025 federal income tax and increase Premium Tax Credits. I wrote a book about Solo 401(k)s available on Amazon. You also mentioned a donor advised fund. Can be a great planning technique. But remember, that (potentially) lowers taxable income. It does not lower “adjusted gross income.” Thus, the donor advised fund can help reduce current year federal income tax but it cannot help increase the Premium Tax Credit.
Hello Sean,
I’ve been doing some research on the SEPP (72T) Plan and saw your videos on Youtube. It is very informative! My wife and I wanted some clarification before we pull the trigger on retirement in Texas. We’re currently with Fidelity and have $3mil saved up in our IRA’s ($2mil in traditional IRA and $1mil in my Roth) and both at 50 years old and have the following questions.
1. If we enroll in the SEPP plan, is the plan through Fidelity or the IRS?
2. Also, assuming we have a beginning SEPP account balance of $2mil from day one, after 10 years of 5% distribution, will our ending balance be at least $2mil from accumulation of unused interests or is the ending balance the exact amount as we invested 10 years earlier ?
3. Is the SEPP account invested in the investments we choose or which entity is managing our account during this time?
4. Assuming we manage our own SEPP account, if our investments are in dividend stocks or dividends ETF’s, do we sell a portion of these investments every year to pay myself the 5% or does Fidelity do all of that automatically?
We apologize, but we’re little confused in the management our SEPP investment during the 10 years and responsible for the FIXED withdrawals from the SEPP? If you are a fee for service advisor, please let us know your rates for a Zoom call if we need to dive deeper.
Thank you in advance!
Phillip, thank you for commenting. I strongly recommend you educate yourself prior to implementing a SEPP plan. I recommend the book Cody Garrett and I just wrote, Tax Planning To and Through Early Retirement, which has foundational knowledge you need before you even think about a 72(t) payment plan. That book also has a chapter on accessing money in retirement accounts prior to age 59 1/2, which includes detailed discussions of 72(t) payment plans. If I were you I would read a resource like Tax Planning To and Through Early Retirement and then reassess. That reassessment could include consulting with an advisor. Having educated yourself upfront you will get much more out of working with an advisor.
Hello Sean,
I just purchased the book on Amazon and look forward to reading it. Thank you for the recommendations.
Hi Sean, through your company, do you or anyone you work with also file tax returns and give guidance? Are you taking on new clients? Seems like most CPAs do the tax return part great then we have to jump to a Fi personal advisor. Would love to find a tax preparer that also wears the taxes in Fi hat! I’m in LA county.
Cindy, thanks for commenting. My Firm doesn’t take on any new tax return preparation clients. Sorry I won’t be able to assist you.
Hi – first off, appreciate the insights you provide. Thank you – good reading!
I bookmarked a blog post a while back (https://fitaxguy.com/using-iras-to-pay-income-taxes-in-retirement/) and have been reviewing it for potential action this year. It’s closed for comments now but I had a question: For their 4th Quarter Estimated Tax Payment, why would Homer & Marge need to pay the full 90% of current year tax liability in Option 1, but only need to pay the 100%/110% of prior year tax liability in Options 2-4 (with the remainder due the following April)? Are you saying the safe harbor requirement not be met otherwise?
Thanks.
Thank you for commenting. To be clear, I cannot give you or anyone else tax advice for your own situation in the comments. Rather, I can provide a bit of commentary about the example presented in the blog post. In Option 1 Homer and Marge can’t meet either safe harbor since they are making a late estimated payment. Annualization, not either the safe harbor, is what might get them out of the underpayment penalty. Annualization is based on current year taxable income and liability, not the prior year’s tax liability. Options 2 through 4 rely on withholding to meet the 100%/110% prior year safe harbor, something not available if only making a fourth quarter estimated tax payment.
Suggestion: Include a date at the top of every post. I just read something on SEPPs, but I am unsure about how recent the information is. Of course I will look at the current IRS documents, but in general, if people arrive at your blog after a Google search, they are going to want to know when a post was posted. Feel free to delete this comment, as it is just a suggestion to hopefully help you improve the usefulness of yur blog.
Mark, thanks for reading and commenting. The date is posted at the bottom of each blog post.
Hi. Just wondering if I’ll be notified of a published response to a comment or question. I left one recently but didn’t bookmark the post and can’t find it now. Thanks.
I did respond. Please go to the Pro-Rata Rule page on the blog and you’ll see my response.
Hi Sean,
Thank you for all the wonderful finance educational videos—you do an excellent job breaking down complex topics in a clear and practical way.
I wanted to ask if there is a link to the Google Docs or spreadsheets you reference in your videos that viewers can access or make a copy of. Having access to those templates would be extremely helpful for conducting our own analysis and applying the concepts you explain.
Thanks again for the great content, and I really appreciate the value you provide to the community.
Best regards,
Jag
Thank you for all the information you provide especially regarding the Widow’s Tax Trap.
Your videos and book are so informative (but it’s a LOT to absorb!) I am a widow (age 68) and have a lot of anxiety concerning the traditional IRA and the tax trap but your info has helped with the fear. I notice your examples use a widow age 81. Am I correct to
assume the tax trap will be worse for a younger widow? It seems that if you’re in a higher tax bracket it doesn’t make sense to do Roth conversions if they will push you into a higher bracket and start IRMAA? If I pay taxes on conversion, I lose out on growth in the traditional IRA, end up in a higher tax bracket and get hit with IRMAA sooner. Or should a younger widow do roth conversions? Thanks!
I am sorry to hear about your loss.
I can’t give you advice in comments other than to say fear and anxiety when it comes to the taxation of traditional retirement accounts is not warranted.
As I’ve said in plenty of other places: can Roth conversions be beneficial? In some cases, yes. Are they necessary? Rarely, in my opinion. In my opinion, the situation where a Roth conversion is necessary is usually when someone on an ACA medical insurance plan has income so low that they would not qualify for a Premium Tax Credit without doing a Roth conversion.
So my opinion is that someone such as yourself should consider Roth conversions as a potentially beneficial tactic.
Another question anyone considering even a beneficial Roth conversion is “Who benefits?” It turns out the people who tend to benefit from Roth conversions are (a) our elderly affluent selves and (b) our heirs while enjoying a financial windfall. I think that is quite revealing.