Chapter 9: IRAs and SEPs

Question 1

What advantage do SEPs have over IRAs?

Answer 1

greater funding limits

Question 2

Traditional IRA contribution limit

Answer 2

6,500

Question 3

Traditional IRA catch-up contribution

Answer 3

1,000

Question 4

Traditional IRA contribution Income Phase-Out

Answer 4

Doesn’t have an income phaseout limit

Question 5

Traditional IRA Deduction Phaseout for an Active Participant in the Plan.

Answer 5

Single: 73K - 83K
MFJ: 116K - 136K

Question 6

Traditional IRA Deduction Phaseout when only one spouse is an Active Participant in the Plan.

Answer 6

218K - 228K

Question 7

Traditional IRA Deduction Phaseout for an Inactive Participant in the Plan.

Answer 7

no limit

Question 8

ROTH IRA Max Contribution amount

Answer 8

6,500

Question 9

ROTH IRA Catch-Up contribution Limit

Answer 9

1,000

Question 10

ROTH IRA Contribution Phaseout

Answer 10

Single: 138K - 153K
MFJ: 218K - 228K
MFS: 0 - 10K

Question 10

ROTH IRA Deduction

Answer 10

NONE

Question 11

SEP Contribution Limit

Answer 11

25% of income or $66,000

Question 12

SEP Catchup contribution

Answer 12

NONE

Question 13

SEP Contribution PhaseOut

Answer 13

NONE

Question 14

SEP Deduction PhaseOut

Answer 14

NONE

Question 15

SARSEP Contribution Limit

Answer 15

22,500

Question 16

SARSEP Catch-up Contribution Limit

Answer 16

7,500

Question 17

SARSEP Contribution Phaseout

Answer 17

NONE

Question 18

SARSEP Deduction PhaseOut

Answer 18

NONE

Question 19

What advantages are lost when a Qualified plan is rolled over to a IRA plan?

Answer 19

Lump-Sum Distribution Taxation Options:
1. 10-year forwarding
2. pre-1974 capital gain treatment
3. Net Unrealized Appreciation

Loans Not Permitted in IRAs

Question 20

What is the Minimum Distribution Rules for Traditional IRAs?

Answer 20

Required Minimum Distributions during life.

After death, 10-year rule

Question 21

What is the Minimum Distribution Rules for ROTH IRAs?

Answer 21

No Required Minimum Distribution During Life.

After death, 10-year rule.

Question 22

What is the excise tax for contributions in excess of the limit?

Answer 22

6%. Excise tax can be avoided by withdrawing the excess contributions before April 15, tax day.

Question 23

what does being an Active Participant in an employer-sponsored plan limit?

Answer 23

It limits the deductibility of traditional IRA contributions.

Question 24

At what MAGI does the Saver's Credit (AKA Retirement Savings Contributions Credit) phaseOut?

Answer 24

Single: 36,500 MFJ: 73,000

Question 25

What is the maximum credit that can be earned through the Saver's Credit (AKA Retirement Savings Contributions Credit) ?

Answer 25

1,000 per person each year or 2,000 per year for MFJ.

Question 26

What does the Back-Door ROTH enable?

Answer 26

Permits taxpayers that have income in excess of the annual contribution limits to fund ROTH IRAs

Question 27

When does the Back-Door ROTH not work?

Answer 27

when the employee also has other IRA accounts/balances. Only works with the employee has NO OTHER IRA accounts. If employee DOES have other IRA accounts, the basis is prorated over all IRA balances.

Question 28

SEP Eligibility Rules

Answer 28

age 21 or older. worked for 3 of last 5 years received compensation of at least $750 during the year.

Question 29

Employer Funded SEP contributions

Answer 29

Must be made to all living, dead, and no longer employed employees for the years.

Question 30

Contribution of Employer Funded SEPs are limited to

Answer 30

the lesser of 25% an employees covered compensation OR 66K Permitted Disparity Accepted.

Question 31

SEP Vesting

Answer 31

100% vested at all times.

Question 32

Rules for Qualified Distributions

Answer 32

account must be atleast 5 years old owner must be 59 1/2 years old at time of withdrawal Expections: Death, Disability, First Home purchase up to 10K.

Question 33

Exceptions to the 10% penalty for early qualified withdrawals. (11)

Answer 33

1. Death 2. Disability 3. Medical Expenses in excess of 7.5% AGI 4. Higher Education 5. Unemployed paying health insurance premiums. 6. child birth or adoption - up to 5,000 in year of birth or adoption. 7. age 591/2+ 8. Substantially Equal Periodic Payments 9. IRS Levy 10. First-Time Home Purchase up to 10K 11. Distributions for military reserve called to active duty.

Question 34

saver's credit

Answer 34

AKA retirement savings contribution credit. built to encourage low income to save for retirement. Saver's Credit income phaseout threshold is: Single : 36,500 MFJ : 73,000