IRA / Pension Distributions

Question 1

What is the age at which you must start taking Required Minimum Distributions (RMDs) from an IRA?

Answer 1

73 years old
For tax year 2024 this would mean RMD’s could apply to those born in 1951 or before

Question 2

Fill in the blank: Distributions from a Traditional IRA are taxed as _____ income.

Answer 2

ordinary

Question 3

What is the penalty for early withdrawal from an IRA before the age of 59½?

Answer 3

10% additional tax

Question 4

What is the main benefit of a Roth IRA distribution?

Answer 4

Qualified distributions are tax-free.

Question 5

What is the maximum contribution limit for an Roth IRA in 2024 for individuals under 50?

Answer 5

$7,000

Question 6

True or False: You can contribute to a Traditional IRA at any age if you have earned income.

Answer 6

True

Question 7

Fill in the blank: The IRS allows a one-time _____ of funds from one IRA to another within a 12-month period.

Answer 7

rollover

Question 8

What is the consequence of failing to take RMDs from an IRA?

Answer 8

50% excise tax on the amount not withdrawn

Question 9

True or False: You can withdraw contributions from a Roth IRA at any time without penalty.

Answer 9

True

Question 10

What is a SEP IRA primarily used for?

Answer 10

Self-employed individuals and small business owners.

Question 11

Short Answer: What is the difference between a Traditional IRA and a Roth IRA?

Answer 11

Traditional IRA contributions are tax-deductible, Roth IRA contributions are made with after-tax dollars.

Question 12

What is the contribution limit for a catch-up contribution for individuals aged 50 and older in 2024?

Answer 12

$1,000

Question 13

Multiple Choice: Which of the following distributions is penalty-free? A) First-time home purchase B) Medical expenses C) Higher education expenses D) All of the above

Answer 13

D) All of the above

Question 14

Fill in the blank: A _____ IRA allows for employer contributions and is typically used by small businesses.

Answer 14

SEP

Question 15

True or False: Contributions to a Traditional IRA can be made even if you participate in an employer-sponsored retirement plan.

Answer 15

True

Question 16

What is the tax treatment of early withdrawals from a Roth IRA?

Answer 16

Contributions can be withdrawn tax-free, but earnings may be taxed.

Question 17

Short Answer: What is the purpose of the IRS Form 5329?

Answer 17

To report additional taxes on IRAs, including penalties for early withdrawal.

Distribution Code 1 in box 7 would indicate
that a 10% penalty would apply unless there is a reason on form 5329.

Code 3 would indicate a 25% penalty unless there is a reason on form 5329

Question 18

What is the maximum annual contribution limit for a SIMPLE IRA in 2023?

Answer 18

$16,000

$3500 Catch up for 50+

Question 19

True or False: You can convert a Traditional IRA to a Roth IRA.

Answer 19

True

Question 20

Multiple Choice: Which of the following can affect the amount of your RMD? A) Account balance B) Life expectancy C) Both A and B D) None of the above

Answer 20

C) Both A and B

Question 21

QCD’s are non- taxable. Where do you enter the QCD payments in taxslayer?

Answer 21

Federal Section
- IRS/Pension Distributions
-Non- Taxable
Box 2 of the 1099-R (taxable amount) should NOT include the QCD amount

Question 22

Types of non taxable income from a 1099 Distribution= QCD, Public Safety Officer’s Medical expense up to $3,000 and
Health Savings Account distribution

Any other steps with non taxable distributions?

Answer 22

Yes, report non taxable distributions
under Income- IRA - pension distributions-
Non- taxable

Question 23

What is a clue on the 1099-R that there may be distributions to be excluded due to employee contributions?

Answer 23

1). No taxable amount listed in box 2a
2) Box 9b shows an amount of employee contributions

In this case you may need to calculate how much can be excluded by using the SIMPLIFIED METHOD.

Make sure this process hasn’t already been done. Paper should be in last year’s taxes if it has been done. If not, and you figure it out, be sure and print out the results of the simplified method.

Question 24

Railroad Tier I is treated as if it’s a Social Security statement.

Railroad Tier II is entered on the 1099 form
Is box 2a is empty (taxable amount) and it shows “ Taxpayer Contributions”, you may need to do the Simplified Method to find out how much gets excluded.

Q- What color are these Railroad Forms?

Answer 24

Tier I is usually a blue form and will indicate
that the benefits are equivalent to Social Security

Tier II is green and entered on a 1099-R

Question 25

How to handle a Social Security 1099 (SSA-1099) that has LUMP SUM amount(s)?

1) See how much these lump sum amounts will effect this year’s return. If it’s alot, consider amending return(s) from years listed to include the lump sum amounts.

Lump sum SS is usually from previous year(s) delayed disability payments ( retro active)