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Federal tax prep > Chapter 16 - Questions (Retirement) > Flashcards

Chapter 16 - Questions (Retirement) Flashcards

1
Q

What are qualified retirement plans?

A

Plans that are eligible for favorable tax treatment because it meets the requirements of the IRC 401a and the Employment Retirement Income Security Act of 1974.

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2
Q

What advantageous tax treatment is allowed for qualified retirement plans?

A

Employers may deduct the annual allowable contribution they make for each plan participant.

Contributions and earnings on contributions are tax-deferred until withdrawn for each participant.

In some cases, taxes may be deferred even longer through a rollover into an IRA.

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3
Q

What are nonqualified retirement plans?

A

Plans that do not meet the requirements of IRC 401(a) and ERISA, and do not qualify for favorable tax treatment.

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4
Q

What are nonqualified plans usually designed for?

A

Designed to meet specialized retirement needs of key executives and other select employees.

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5
Q

What are nonqualified plans exempt from?

A

The discriminatory and top-heavy testing to which qualified plans are subject.

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6
Q

What are the two kinds of qualified plans?

A

Defined benefit plan

Defined contribution plan

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7
Q

What is a defined benefit plan?

A

A plan where the employee receives a predetermined, formula-based benefit at retirement.

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8
Q

What is the most common known type of defined benefit plan?

A

A pension, where the retirement benefit is calculated by a formula based on number of years worked, age, and taxpayer’s history of earnings with employer.

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9
Q

What is an annuity?

A

A type of defined benefit plan that is a series of payments under a contract, made at regular intervals over a period of more than one year.

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10
Q

What is a defined contribution plan also known as?

A

A deferred compensation plan

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11
Q

What is a defined contribution plan?

A

A retirement plan in which the employee or employer makes pre-tax contributions into a retirement account, which grow tax-free until withdrawn.

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12
Q

What is the most commonly known type of defined contribution plan?

A

401(k)

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13
Q

What tax advantages does a 401(k) have?

A

Employee contributions are tax-deferred.

Earnings on the contributions are also tax-deferred until the taxpayer receives distributions.

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14
Q

How may an employer do a matching contribution?

A

They may make an additional contribution to the account on behalf of the employee.

They may offer a profit-sharing contribution to the plan.

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15
Q

What is a 403(b) plan?

A

A tax-advantaged retirement savings plan similar to a 401(k) but for public education, some nonprofit, and cooperative hospital service organizations.

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16
Q

Are 403(b) qualified plans?

A

Technically no. However, their main features are identical to qualified plans, so they are treated the same for our purposes.

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17
Q

What is a 457 plan?

A

Tax-advantaged, deferred-compensation retirement plans available to government employees.

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18
Q

Are 457 plans qualified plans?

A

No, but their primary features are identical and so they are treated the same for our purposes.

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19
Q

Are there contribution limits to deferred-compensation plans?

A

Yes, there is an annual maximum that is indexed for inflation.

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20
Q

What happens if a taxpayer contributes more than the allowed amount to a deferred-compensation plan?

A

They may be subject to penalties if the excess amount is not withdrawn for April 15 of the following tax year.

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21
Q

What benefit do taxpayers over the age of 50 have for deferred-compensation plans?

A

They are allowed an annual “catch up” contribution in addition to the maximum allowable contribution amount. For 2017 $18000 + $6000.

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22
Q

Where can a tax professional see contributions to a deferred compensation plan?

A

On the W-2 in box 12, coded to indicate.

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23
Q

What is an IRA?

A

An Individual Retirement Arrangement account is a personal savings plan that gives taxpayers tax advantages for saving moneyfor retrement.

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24
Q

What are two tax advantages of an IRA?

A

Money contributed may be fully or partially deductible.

Amounts in the IRA grow tax-free and are not taxed until withdrawn.

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25
Q

What are the two types of IRA accounts?

A

Traditional IRA.

Roth IRA.

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26
Q

What kind of money must be used to fund IRAs

A

Earned income (or, compensation). Wages, salaries, tips, commissions, professional fees, bonuses, net self-employment income, AND alimony payments.

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27
Q

If the W-2 shows any nonqualified plan distributions for 457 plan distribution in box 11, what happens?

A

The amount in box 11 must be subtracted from the taxpayer’s wages when determining their compensation for IRA purposes.

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28
Q

What type of income cannot be used to fund IRAs

A

Investment income, foreign earned income, business income where the taxpayer does not actively participate. Any foreign earned income, housing exclusion, or deduction the taxpayer is claiming must be subtracted to arrive at total compensation.

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29
Q

Is there a limit to IRA contributions?

A

Limited to the lesser of (2017):

$5500 ($6500 if 50+)
100% of the taxpayer’s compensation

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30
Q

Can a taxpayer contribute money to multiple IRAs in the same year?

A

Yes, but the limit is shared among them.

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31
Q

What are the restrictions on a taxpayer to establish and contribute to a traditional IRA?

A

Must have taxable compensation and must not have reached the age of 70.5 by the end of the tax year. (6 months after their 70th birthday).

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32
Q

Where are contributions to traditional IRAs deducted on the tax form?

A

1040A line 17, 1040 line 32.

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33
Q

If IRA money is withdrawn before the taxpayer reaches age 59.5, what happens?

A

They are subject to a 10% early withdrawal penalty, as well as their marginal tax rate.

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34
Q

Are there different rules that concern the deductibility of traditional IRA contributions?

A

Different rules for:

Taxpayers who are active participants in employer-maintained retirement plans at any time during the year.

Taxpayers who are not active participants, including joint filers whose spouses are not active participants.

Joint filers who are not active participants, but whose spouses are active participants.

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35
Q

Who is considered an active participant in a employer-maintained retirement plan?

A

someone how participates at any time during the year in any of the following:
A qualified retirement, profit-sharing, or stock bonus plan.
A qualified annuity plan
A 403(b) tax-sheltered annuity plan
A SIMPLE plan
A government plan (other than a 457)
Certain pension plans funded solely by employee contributions
A plan established by a self-employed taxpayer (e.g. SEP)

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36
Q

How does a tax professional know if the taxpayer is an active participant in an employer-maintained retirement plan?

A

W-2 Box 13 Retirement Plan box will be checked.

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37
Q

Is someone with coverage under social security or railroad retirement considered an active participant in an employer-maintained retirement plan?

A

No

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38
Q

Is a person receiving retirement benefits from a former-employer’s plan treated as an active participant?

A

No, unless they are covered under a current employer’s plan.

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39
Q

Are IRA contributions made by taxpayers who are not active participants (or where spouses are not active participants) deductible?

A

Yes, fully deductible up to the maximum allowable contribution amount.

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40
Q

If both spouses have compensation, can they each establish and IRA?

A

Yes, and they may contribute, and deduct an amount within the limits.

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41
Q

Do community property laws impact IRA contributions and handling?

A

No. Contributions are computed separately, without regard to community property laws.

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42
Q

Can a married taxpayer establish a spousal IRA, even if their spouse has received little or no compensation for the tax year?

A

Yes

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43
Q

If a couple has a spousal IRA, how must they file?

A

Must file a joint return.

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44
Q

When may IRA be established and contributions made?

A

Up until the due date of the tax return for the year.

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45
Q

Does the contribution amount limit differ based on MAGI for active participants?

A

No, it is the same as it is for nonparticipants.

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46
Q

What may be limited for IRAs for active participants?

A

The amount that is deductible may be limited, this is based on the MAGI.

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47
Q

How is MAGI determined for traditional IRA purposes?

A

AGI plus any of the following:
Student loan interest deduction
Tuition and Fees deduction
Excludible employer-provided adoption benefits
Excludible US Savings bond interest
Domestic production activity deduction
Certain excludible foreign and US possession income.

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48
Q

For full deduction on the traditional IRA for active participants, what must the MAGI be?

A

For Single, HOH: $62000 or less
For MFJ, QW: $99000 or less
For MFS: No full deduction

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49
Q

When is the IRA deduction reduced for active participants in terms of MAGI?

A

Single, HOH: $62001-$71999
MFJ, QW: $99001-$118999
MFS: $1-$9999

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50
Q

When is the IRA deduction eliminated for active participants in terms of MAGI?

A

Single, HOH: $72000 or more
MFJ, QW: $119000 or more
MFS: $10000 or more

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51
Q

What are nonparticipating spouses?

A

Married taxpayers who are not active participants in employer-maintained retirement plans, but who are filing joint returns with spouses who are active participants in such plans.

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52
Q

Is there an age limitation for Roth IRA contributions?

A

No, taxpayers can make contributions after age of 70.5, which is restricted for traditional IRA contributions.

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53
Q

Are distributions required for Roth IRAs?

A

No, they do not have required distributions, the taxpayer can leave contributions in the account as long as they wish.

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54
Q

What rules for traditional IRAs are the same as for Roth IRAs?

A

Taxpayer must receive compensation during the year.

Contributions may be made by the due date of the return (not including extensions).

Contributions for each spouse are limited (2017) to $5500/$6500 for age 50+ or total compensation.

Taxpayers can make contributions for themselves and a nonworking or lower-income spouse if they file a joint return.

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55
Q

Are contributions to a Roth IRA deductible?

A

No. Contributions are never deductible.

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56
Q

Are distributions form a Roth IRA taxable?

A

No.

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57
Q

Are Roth contributions reported on the tax return?

A

No. Taxpayers should keep records of them.

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58
Q

Is there a phaseout for the allowable Roth IRA contribution?

A

Yes, based on MAGI. Applies whether or not the taxpayer or spouse is an active participant.

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59
Q

What is the MAGI limit for full contribution to Roth IRA?

A

S, HOH: Under $118000
MFJ, QS: Under $186000
MFS: $0

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60
Q

What is the MAGI limit for reduced contribution to a Roth IRA?

A

S, HOH: $118000-$132999
MFJ, QW: $186000-$195999
MFS: $1-$9999

61
Q

What is the MAGI limit where no contributions may be made to a Roth IRA?

A

S,HOH: $133000 or more
MFJ, QW: $196000 or more
MFS: $10000 or more

62
Q

Is MAGI computed the same for Roth IRA as for Traditional IRA?

A

Yes, except income resulting from the conversion of a traditional IRA into a Roth IRA is not included.

63
Q

May taxpayers transfer traditional IRA funds to a Roth IRA?

A

Yes, transfer is called a Roth IRA conversion and taxpayer is required to pay income tax on the transferred amounts in the year of conversion.

64
Q

What form reports IRA conversions?

A

Form 8606, Nondeductible IRAs

65
Q

What is a rollover in terms of IRA

A

Where the taxpayer receives a distribution from their traditional IRA and personally contributes the money into their Roth within 60 days.

66
Q

What is a trustee-to-trustee transfer in terms of IRA

A

The taxpayer requests their traditional IRA trustee to transfer the funds directly into their Roth IRA.

67
Q

What is a reclassification in terms of IRA

A

The taxpayer reclassifies the traditional IRA as a Roth IRA if the account is maintained by the same trustee.

68
Q

What is a transfer in terms of IFA

A

The taxpayer transfers all or part of their traditional IRA funds into a new Roth IRA account that is maintained by the same trustee.

69
Q

Where is information about a Roth IRA conversion found?

A

In IRA Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)

70
Q

What is a SIMPLE IRA

A

A retirement plan generally set up by small employers to allow employees to contribute pre-tax compensation into the plan. Employers are required to either make a matching contribution based on the employee’s elective deferred compensation or a nonelective contribution that must be paid to all eligible employees.

71
Q

How is a SIMPLE IRA different from a traditional IRA?

A

Unlike a traditional IRA, the employee does not reeive a contribution adjustment on their return, because their contributions are made by their employer on their behalf prior to calculating and remitting federal and state income tax.

72
Q

What is the “saver’s credit”

A

A nonrefundable credit for qualified lower and middle-income taxpayers who make retirement plan contributions.

73
Q

Who cannot claim the saver’s credit?

A

Taxpayers who were:

Born after Jan 1, 2000 (cutoff changes each year)
Claimed as a dependent on someone else’s return
Full-time students during any part of 5 calendar months in the year.

74
Q

What contributions qualify for the Saver’s Credit?

A

Contributions to traditional and roth IRAs

Voluntary salary deferrals to 401k plans, 403b plans, 457, SEPs, and SIMPLE plans.

Voluntary employee contributions to qualified retirement plans

Contributions to 501(c)(18)(D) plans

75
Q

Do employers’ matching contributions count toward the Saver’s Credit?

A

No

76
Q

Do mandatory contributions qualify for the Saver’s Credit?

A

No (contributions are mandatory if they are required as a condition of employment)

77
Q

When must contributions that qualify for the Saver’s Credit be reduced?

A

They must be reduced by any distributions from the same types of plans made in the two tax years prior to the current year until the due date of the current year’s return.

78
Q

What distributions do not reduce the amount eligible for the Saver’s Credit?

A

Direct rollovers between trustees
funds converted from a traditional to a Roth IRA
Loans from qualified employer plans
Excess contributions or deferrals (plus earnings)
Contributions made and withdrawn before the due date of the return.
Dividends on stock held by employee stock ownership plan
Dividends on stock held by an employee stock ownership plan
From military retirement plan

79
Q

The Saver’s Credit is based on how much in qualified contributions?

A

Up to $2000 per taxpayer or for each spouse if MFJ

80
Q

How much credit does the Saver’s Credit give?

A

Either 50%, 20%, 10% or 0, depending on filing status and MAGI.

81
Q

What is the MAGI to qualify for the 50% credit rate on the Saver’s Credit?

A

MFJ: Up to $37000
HOH: Up to $27750
All others: Up to $18500

82
Q

What is the MAGI to qualify for the 20% credit rate on the Saver’s Credit?

A

MFJ: $37001-$40000
HOH: $27751-$30000
All others: $18501-$31000

83
Q

What is the MAGI to qualify for the 10% credit rate on the Saver’s Credit?

A

MFJ: Over $62000
HOH: Over $46500
All others: Over $31000

84
Q

Where is the Saver’s Credit Calculated?

A

Form 8880 - Credit for Qualified Retirement Savings Contributions.

85
Q

Where is the Saver’s Credit entered on the tax form?

A

Form 1040A, line 34 or Form 1040 line 51.

86
Q

What is Full Retirement Age?

A

For workers born before 1938, full retirement age is 65. For workers born after 1937, the retirement age is gradually being increased to age 67.

87
Q

What is full retirement age for someone born in 1965?

A
  1. For anyone born in 1960 an beyond, it is 67.
88
Q

What is form SSA-1099 used for?

A

To notify the taxpayer of total social security benefits received during the year.

89
Q

What is form RRB-1099 used for?

A

To notify the taxpayer of tier 1 RRB benefits received during the year.

90
Q

How much of a taxpayer’s social security or tier 1 RRB benefits is subject to federal tax?

A

It varies from 0 to 85%, based on MAGI.

91
Q

For Filing status S, HOH, QW, what are the MAGI levels for taxability of social security/tier1 RRB benefits?

A

Non taxable: $0-$25000
Up to 50% taxable: $25001-$34000
Up to 85% taxable: $34001+

92
Q

For Filing status MFJ, what are the MAGI levels for taxability of ss/tier1 rrb benfits?

A

Non taxable: $0-$32000
Up to 50% taxable: $32001-$44000
Up to 85% taxable: $44001+

93
Q

For MFS, what are the MAGI levels for taxability of ss/tier1 rrb benefits?

A

Up to 85% taxable: $1 and over

94
Q

How is MAGI determined for determining the level of taxability on SS/Tier 1 RRB benefits?

A

Sum of regular AGI (without SS/Tier1 RRB)
Any excluded employer-provided adoption benefits
Tax-exempt interest
Interest from Qualified US Savings bonds excluded due to qualified education costs
Any excluded foreign earned income or housing allowance, or certain US possession income.
Any student loan interest deduction
Any tuition and fees deduction
Any domestic production activities deduction

95
Q

In what case are Tier 1 RRB taxed differently from SS benefits?

A

Railroad retirement disability benefits that are payable to individuals who would not be entitled to SSDI, or that are in excess of the social security benefits to which an individual would be entitled, generally are fully taxable.

Railroad retirement benefits that are payable at an age earlier than comparable social security benefits, or in an amount greater than social security benefits, are generally fully taxable.

96
Q

What is a distribution?

A

when a taxpayer takes money out of a retirement account.

97
Q

How are retirement account distributions reported?

A

Form 1099-R, Distribution From Pension, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

98
Q

Are retirement account distributions taxable?

A

Generally fully or partially taxable because they are funded with pre-tax contributions and earnings grow tax-free while in account.

99
Q

What is a fully taxable distribution?

A

A distribution in which the taxpayer did not make after-tax contributions, or from which all after-tax amounts have been recovered in previous years. If the taxpayer made no contributions to the pension plan or annuity (for example, the employer paid all the costs), or if the taxpayer made only pre-tax contributions to a plan, the entire distribution amount received during the year is taxable.

100
Q

Where on the 1040A would taxable distribution income go?

A

Line 12b

101
Q

What is a partially taxable distribution?

A

A distribution in which the taxpayer has made after-tax contributions to the retirement account. When the taxpayer receives a distribution, a portion of the distribution represents a nontaxable return of their after-tax contribution.

102
Q

Does a taxpayer usually have to compute the taxable amount of a partially-taxable distribution?

A

Usually not. It will be reported on Form 1099-R box 2a.

103
Q

What if taxpayer’s 1099-R has box 2a blank and checked box 2b, taxable amount not determined?

A

The taxpayer is required to determine their taxable amount of the distribution.

104
Q

What is referred to as the Simplified Method?

A

A means that may be used of computing the taxable portion of a pension or annuity with a starting date after July 1, 1986 and before November 19,1996, where the taxpayer has after-tax contributions in the plan.

105
Q

When are taxpayers required to use the simplified method?

A

If their pension or annuity starting date is after November 18, 1996, they must use the simplified method. The following conditions must be met:
The payments must be from a qualified pension, profit-sharing, or stock bonus plan; a qualified annuity plan; or a tax-sheltered annuity (403b) plan.
The annuitant must be under 75 when payments befin, or if 75 or older, there must be fewer than 5 years of guaranteed payments.
The payments are for either the annuitant’s life or the joint life of the annuitant and a beneficiary.

106
Q

Under the simplified method, how is the taxpayer’s excludible amount determined?

A

By using a simple table, found on the Simplified Method Worksheet. The table shows the anticipated number of monthly payments based on age for a pension or annuity starting after Nov 18, 1996.

107
Q

What is the taxpayer’s age in terms of the simplified method?

A

The age on the date the pension payments begin. Often a pension will begin in a year before the taxpayer reaches their full retirement age.

108
Q

How is the excludible amount of each payment determined in the simplified method?

A

The after-tax investment, or cost in the pension or annuity, is divided by the appropriate number from the table to determine the excludible amount for each payment.

109
Q

For partly taxable pensions and annuities with starting dates after Dec 31, 1986, is there an excludible amount every year going forward?

A

No. Once the cost is recovered, the pension or annuity is fully taxable. If the taxpayer (and survivor if it is a joint survivor annuity) dies before the cost has been fully recovered, the unrecovered amount is deducted on the taxpayer’s final return as a miscellaneous itemized deduction (Form 1040 Schedule A).

110
Q

Does the excludible amount of payments change?

A

No, it remains the same until it ceases entirely when the final beneficiary dies or the cost is fully recovered), even though the annuity or pension payments may increase due to cost of living provisions or other reasons.

111
Q

What is used to calculate information for the simplified method?

A

The Simplified Method Worksheet

112
Q

What is the general rule and how is it used?

A

Means of calculating the excludible portion of pension and annuity payments which may be used if a taxpayer started receiving payments before Nov 19, 1996. (Simplified method used for on/after that date in most cases).

113
Q

In cases of purchased annuities and other nonqualified plans, which method is used to calculate the excludible portion?

A

The General Rule must be used regardless of the annuity starting date.

114
Q

What does the general rule use in terms of calculating the excludible amount?

A

Complex actuarial tables.

115
Q

If you encounter a pension or annuity that is being or must be recovered using the general rule, what should you do?

A

Partner up with an experienced tax professional, and read the IRS Publication 939, General Rule for Pensions and Annuities.

116
Q

What is a death benefit exclusion?

A

Something that was available for certain beneficiaries of pensions and annuities in the past. It was repealed for deaths after Aug 20, 1996.

117
Q

What form reports IRA distributions?

A

Form 1099-R

118
Q

If a distribution is from an IRA, how is that distinguished on Form 1099-R?

A

An appropriate code will be entered in box 7, and the small box to the right of box 7 will be checked.

119
Q

Why might a distribution from an IRA be reported on Form 1099-R as fully taxable?

A

The IRA trustee usually does not know how much, if any, of the taxpayer’s IRA contributions were nondeductible.

120
Q

If a taxpayer has made nondeductible contributions, but their 1099-R reports the distributions as fully taxable, what is used?

A

Form 8606, Nondeductible IRAs is used to compute the taxable portion of any distributions.

121
Q

If the IRA distribution is fully taxable, where does it go on Form 1040A

A

Line 11b (Line 15b for 1040). Gross amt in 11a, taxable in 11b

122
Q

What is a qualified distribution from a Roth IRA?

A

One that:
Is taken after the end of the 5 year period that began Jan 1 of the tax year for which the account was set up.

Is made after the account owner has died, becomes disabled, or reaches age 59.5, or is used to buy, build, or rebuild the taxpayer’s first home.

123
Q

What is used to determine the taxable amount of any nonqualified distribution?

A

Form 8606, Part III (on pg 2)

124
Q

What happens if a taxpayer takes an early distribution from a qualified retirement plan or IRA?

A

The tax code imposes an additional 10% early withdrawal penalty tax on the taxable portions of most early distributions.

125
Q

What is an early distribution?

A

One made before the taxpayer has reached 59.5 and is denoted by code 1 in box 7 of form 1099-R

126
Q

Are there exceptions to the penalty for early distribution from a qualified retirement plan or IRA?

A

Yes, several.

127
Q

Where are exceptions for early distribution penalty noted?

A

The code is entered on Form 5329, Line 2

128
Q

In what cases is there not a penalty for early distribution from a qualified retirement plan or IRA?

A

01: Distribution made to an employee who separated from service during or after the year in which they reached age 55 (age 50 for qualified public safety employees) (Does not apply to IRAs)
02: Distribution is part of a series of substantially equal periodic payments, made at least annually for the life of the participant or the life expectancy of the participant. (Applies only if taxpayer no longer works for employer of plan)
03: Distribution was made due to permanent and total disability.
04: Distribution was made due to death of the employee.
05: Distribution was made in a year that the taxpayer’s unreimbursed medical expenses exceed 7.5% of adjusted gross income (whether the taxpayer itemizes or not).
06: Distribution was made to an alternate payee under a qualified domestic relations order (divorce or separation) (does not apply to IRAs)
07: Distribution was made from an IRA in a year an unemployed taxpayer paid health insurance premiums. (Only for IRAs)
08: Distribution made from an IRA to pay qualified higher education expenses for the taxpayer, spouse, their child or grandchild (whether or not the student is the taxpayer’s dependent) (Only for IRAs)
09: Distribution (up to $10000 lifetime limit) was made from an IRA to pay qualified first-time homebuyer expenses.
10: Distribution was made due to an IRS levy of the qualified plan.
11: Distribution was made to a reservist while serving on active duty for at least 180 days.
12: Other, or multiple exceptions. Refer to instructions.

129
Q

For the age 55 exception, does the person have to reach age 55 prior to separation?

A

No, just by the end of that year.

130
Q

For the medical expense exception, does the distribution money need to be used to pay medical expenses?

A

No. The total medical expenses must exceed 7.5% of AGI, but there is no rule that the distribution has to be used to pay those expenses.

131
Q

For the exception for unemployed taxpayers, what are the details?

A

Taxpayer reached unemployment compensation payments for 12 consecutive weeks, and does not apply to any distribution made more than 60 days after a taxpayer has returned to work.

132
Q

For the qualified higher education expenses, how are those determined?

A

Same meaning as for the education credits, plus room and board if the student is enrolled on at least a half-time basis.

133
Q

What does “first-time homebuyer” mean?

A

Someone who has not owned a home during the two-year period prior to the date of acquisition of the home.

134
Q

Does the first time homebuyer have to be the taxpayer to qualify for the exception?

A

No, can be used for taxpayer, spouse, child, grandchild, parent, or grandparent.

135
Q

If the taxpayer owes a penalty for early distribution, and has no exception, what is done with the 10% penalty.

A

Entered directly on Form 1040 line 50 and write “No” to the left of the line under the heading “Other Taxes” indicating there is no Form 5329. Form 5329 does not need to be completed if no exceptions.

136
Q

Can a Form 5329 be sent to the IRS by itself? (Without filing a return?)

A

Yes, if the taxpayer does not meet the gross income filing requirements but had an early distribution subject to the penalty.

137
Q

What is exemption 01 for early distributions from retirement accounts?

A

The distribution was made to an employee who separated from service during or after the year in which they reached age 55. (Not for IRAs)

138
Q

What is exemption 02 for early distributions from retirement accounts?

A

The distribution is part of a series of substantially equal periodic payments, made at least annually for the life of the participant (or joint lives of participant and beneficiary) or the life expectancy of the participant (or joint)

139
Q

What is exemption 03 for early distributions from retirement accounts?

A

The distribution was made due to permanent and total disability.

140
Q

What is exemption 04 for early distributions from retirement accounts?

A

The distribution was made due to the death of the employee.

141
Q

What is exemption 05 for early distributions from retirement accounts?

A

Made in a year that taxpayer’s unreimbursed medical expenses exceed 7.5% of gross income.

142
Q

What is exemption 06 for early distributions from retirement accounts?

A

The distribution was made to an alternate payee under a qualified domestic relations order (separation or divorce) (Not apply to IRAs)

143
Q

What is exemption 07 for early distributions from retirement accounts?

A

The distribution was made from an IRA in a year an unemployed taxpayer paid health insurance premiums. (Only IRAs)

144
Q

What is exemption 08 for early distributions from retirement accounts?

A

The distribution was made from an IRA to pay qualified higher education expenses for the taxpayer, spouse, child, or grandchild. (Only IRAs)

145
Q

What is exemption 09 for early distributions from retirement accounts?

A

The distribution (up to $10000 lifetime limit) was made from an IRA to pay qualified first-time homebuyer expenses. (Only IRAs)

146
Q

What is exemption 10 for early distributions from retirement accounts?

A

The distribution was made due to an IRA levy

147
Q

What is exemption 11 for early distribution from retirement accounts?

A

The distribution was made to a reservist while serving on active duty for at least 180 days.

148
Q

What is exemption 12 for early distribution from retirement accounts?

A

Other, or multiple exceptions.

Federal tax prep (33 decks)

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