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iras > All IRAs > Flashcards

All IRAs Flashcards

1
Q

Who can establish a Traditional IRA?

A

Any individual with earned income or a non-working spouse who are less than 70 years old.

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2
Q

Who can establish a ROTH IRA?

A

An individual with earned income, subject to limitations, or a non-working spouse even if over 70 1/2 years old.

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3
Q

Are there any contribution eligibility limitations with Traditional IRAs?

A

Yes, contributions are not permitted after the individual has reached 70 1/2 by the end of the contribution year.

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4
Q

Are there any contribution eligibility limitations with ROTH IRAs?

A

Yes, contributions are phased out and limited altogether depending on incomes.

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5
Q

What amount of income for single individuals is the beginning of the phase out of contributions for ROTH IRA owners?

A

$112,000 per year

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6
Q

What amount of income for single individuals is the ROTH IRA owner no longer eligible to contribute to his/her account?

A

$127,000 per year

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7
Q

What amount of income for joint filers is the beginning of the phase out of contributions for ROTH IRA owners?

A

$178,000 per year

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8
Q

What amount of income for joint filers is the ROTH IRA owner no longer eligible to contribute to their account?

A

$188,000 per year

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9
Q

For Traditional IRAs, are nondeductible contributions allowed?

A

Yes

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10
Q

What is the federal tax implication of contributions to Traditional IRAs?

A

Contributions are federally tax deductible at the end of the tax year during filing but may be phased out based on AGI if the individual is also covered by an employer-sponsored retirement plan

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11
Q

What is the federal tax implication of contributions to ROTH IRAs?

A

ROTH IRA contributions are after-tax and are not tax deductible.

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12
Q

Are Traditional IRAs or ROTH IRAs eligible for contributions by an individual’s employer?

A

No.

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13
Q

How much are individuals under age 50 allowed to contribute annually to his/her Traditional IRA?

A

$5500 per year max

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14
Q

How much are individuals over age 50 allowed to contribute annually to their Traditional IRA?

A

$6500 per year max

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15
Q

How much are individuals under age 50 allowed to contribute annually to his/her ROTH IRA, subject to income limits?

A

$5500 per year max

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16
Q

How much are individuals over age 50 allowed to contribute annually to his/her ROTH IRA, subject to income limits?

A

$6500 per year max

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17
Q

Are contributions mandatory in either the Traditional or ROTH IRAs?

A

No, not in either.

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18
Q

When must an account be established to qualify for a prior year contribution?

A

By April 15th

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19
Q

When must contributions be made to qualify for prior year tax deductions?

A

By April 15th

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20
Q

Who directs the investments in the Traditional and/or ROTH IRAs?

A

The individual in both

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21
Q

What is the vesting schedule for investments in Traditional and ROTH IRAs?

A

Vesting is full and immediate in both

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22
Q

What are the tax implications of the growth earnings in Traditional and ROTH IRAs?

A

Growth earnings in Traditional and ROTH IRAs are tax deferred.

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23
Q

What are the tax implications of withdrawals from Traditional IRAs?

A

Withdrawals of contributions and earnings after age 59 1/2 are taxed at ordinary income rates. If taken before age 59 1/2 a 10% penalty may apply

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24
Q

What are the tax implications of withdrawals from ROTH IRAs?

A

Withdrawals of contributions and earnings are tax free if taken after age 59 1/2 and the ROTH has been open at least 5 years. If taken after age 59 1/2 but account open less than 5 years, can be subject to taxes. Withdrawals taken before age 59 1/2 are also subject to ordinary income tax rates and the 10% penalty

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25
Q

How do RMDs apply to Traditional IRAs?

A

RMDs must begin by April 1st of the year following the year the individual turns 70 1/2

26
Q

How do RMDs apply to ROTH IRAs?

A

RMDs don’t apply to ROTH owners until after the death of the ROTH owner

27
Q

Can a spouse who is not participating in their own employer’s plan contribute to their own Traditional IRA if the other spouse is participating in his/her employer’s plan and if so is there a limitation?

A

Yes up to the full allowable amount as long as the combined household AGI is less than $178,000

28
Q

Who can establish a SEP IRA?

A

Corporations, Subchapter S, Self-Employed, Sole Proprietorships, Partnerships and Non-Profits(except nonprofits are not eligible for salary deferral)

29
Q

What are the 3 eligibility factors for SEP IRA contributions?

A

With employer 3 out of the last 5 years, at least 21 years old, and at least $550 in compensation for the year.

30
Q

What are the federal tax implications of contributions to SEP IRAs?

A

Employer contributions are pre-tax and not subject to tax until withdrawn

31
Q

What are the annual employer contribution limits for SEP IRAs?

A

$51,000 or 25% of earned income($255,000 max), whichever is less. If self-employed earned income must be reduced to take contribution into account.

32
Q

Are either employer or individual contributions to SEP IRAs mandatory?

A

No. And, individual contributions to employer provided SEPs are not allowed at all.

33
Q

When must a SEP IRA be established to satisfy prior year contributions?

A

By the employer’s tax filing date including extensions.

34
Q

When must contributions be made into a SEP IRA for prior year status for employers and individuals?

A

By the employer’s tax filing date including extensions and by April 15th for the individuals

35
Q

Who directs the investments in the SEP IRA?

A

The individual

36
Q

What is the vesting schedule for investments in SEP IRAs?

A

Contributions are fully and immediately vested.

37
Q

What are the tax implications of withdrawals from SEP IRAs?

A

Withdrawals are subject to ordinary income tax if taken after age 59 1/2 and a 10% penalty if taken before.

38
Q

How do RMDs apply to SEP IRAs?

A

RMDs must be taken by April 1st following the year the individual turns 70 1/2.

39
Q

Are employer contributions to their employees SEP IRA accounts tax deductible?

A

Yes

40
Q

What are the annual IRS filing requirements for SEP IRAs?

A

There are none.

41
Q

What are the federal tax implications on the growth/earnings in SEP IRAs?

A

Earnings grow tax deferred.

42
Q

Who can establish a SImple IRA?

A

Employers with less than 100 employees who do not maintain another retirement plan.

43
Q

Who is eligible to contribute to a Simple IRA?

A

Any individual who earned $5000in compensation in any 2 prior years and are expected

44
Q

Are eligible employees able to contribute to the SEP IRA offered by their employer?

A

No. Only the employer can contribute, of their own generosity, to the accounts of their employees in a SEP IRA.

45
Q

Can an employer with a SEP IRA only contribute to their own account without ever contributing to the account of an employee?

A

No. At some point the IRA would be audited by the IRS and would be considered “top heavy” if there were never any contributions by the employer to the employee accounts.

46
Q

Is there a cost for an employer to set up a payroll deduction IRA plan for their employees?

A

Yes, albeit nominal

47
Q

If an employer wants to provide employees with a retirement plan but doesn’t want to contribute to their accounts and doesn’t want any cost, what plan can they set up?

A

A payroll deduction IRA plan that is entirely managed individually by each employee but money is able to go right out of their check into their IRA.

48
Q

What are the federal tax implications of contributions to a Simple IRA?

A

Elective and employer contributions are pre-tax and not subject to taxation until withdrawn

49
Q

What are the employer contribution limits in Simple IRAs?

A

The employer must contribute either a dollar-for-dollar match on payroll contributions up to 3% of compensation; or a non-elective contribution equal to 2% of comp up to $255,000

50
Q

In Simple IRAs who is required to contribute to employee accounts?

A

Only the employer is required to contribute to the accounts of their employees.

51
Q

What is the limit for individuals contributing to their employer-provided Simple IRA?

A

100% of earned income up to $12,000 or $14,500 for individuals 50 or older

52
Q

When must a Simple IRA be established?

A

By October 1st for existing businesses or as soon as is administratively feasible for new businesses established after October 1st.

53
Q

When must employer contributions to a Simple IRA be made?

A

By the employers tax filing deadline plus any extensions.

54
Q

When must individual employee contributions to their employer provided Simple IRA be made?

A

Individual payroll contributions are ongoing

55
Q

Who directs the investments in a employer-provided Simple IRA?

A

The individual

56
Q

When are contributions to a Simple IRA vested?

A

In full and immediately

57
Q

What are the tax implications on earnings in a Simple IRA?

A

Earnings grow tax-deferred

58
Q

What are the federal tax implications on withdrawals from Simple IRAs?

A

Withdrawals are subject to ordinary income after 59 1/2 or if taken before a 10% penalty will apply that could increase to 25% if the withdrawal is also taken during the first 2 years of participation in the Simple IRA.

59
Q

How do RMDs apply to Simple IRAs?

A

RMDs must begin by April 1st following the year the individual turns 70 1/2

60
Q

What are the annual filing requirements for Simple IRAs?

A

There are no annual filing requirements

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