IRA Reporting & Legal Compliance

Question 1

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200. What amount should be reported in Box 2 of the 5498?

Answer 1

$28,500 (Box 2 5498 = Rollover Contributions)

Question 2

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200. What amount should be reported in Box 5 of Form 5498?

Answer 2

$30,200 (Box 5 5498 = FMV)

Question 3

On April 12, 2023, Karen, age 67, made a $4,000 contribution to her Roth IRA for 2022. The balance in her Roth IRA before the contribution was $13,300. On October 21, 2023, Karen realized she was not eligible for the Roth IRA contribution and chose to remove it. The balance in her account on October 21, 2023, was $19,150.Karen had not taken any distributions and had made no other contributions. When the distribution was taken, Karen elected to waive federal withholding. What amount should be reported in Box2a?

Answer 3

Box 2a should be left blank for ROTH IRA. (Box 2a 1099-R = Taxable Amount)

Question 4

On April 12, 2023, Karen, age 67, made a $4,000 contribution to her Roth IRA for 2022. The balance in her Roth IRA before the contribution was $13,300. On October 21, 2023, Karen realized she was not eligible for the Roth IRA contribution and chose to remove it. The balance in her account on October 21, 2023, was $19,150.Karen had not taken any distributions and had made no other contributions. When the distribution was taken, Karen elected to waive federal withholding. What distribution code should be reported in Box 7?

Answer 4

T (Age 59 1/2 or older, after tax filing deadline)

Question 5

Tabatha Olson has an IRA at Sunshine Financial Organization.Tabatha died on July 29, 2023. Her IRA’s FMV on this date was$35,002. By December 31, 2023, the IRA’s FMV increased to$36,000. Tabatha’s two beneficiaries, her children, Quincy and Madison, are each entitled to 50 percent of the IRA. In May 2024,Sunshine Financial Organization generated 2023 Forms 5498 using Method 1, it showed $_______________ as the date of death FMVon Tabatha’s Form 5498 and $_______________ as the December31 FMV on each beneficiary’s Form 5498.

Answer 5

$35,002; $18,000

Question 6

Tabatha Olson has an IRA at Sunshine Financial Organization.Tabatha died on July 29, 2023. Her IRA’s FMV on this date was$35,002. By December 31, 2023, the IRA’s FMV increased to$36,000. Tabatha’s two beneficiaries, her children, Quincy and Madison, are each entitled to 50 percent of the IRA.
In May 2024, Sunshine Financial Organization generated 2023 Forms 5498 using Method 2, Sunshine Financial Organization must generate a Form 5498 for Tabatha showing an FMV of$_______________ and a Form 5498 for each beneficiary showingan FMV of $________________. The financial organization also must notify the decedent’s estate that the executor may request a date of death valuation.

Answer 6

$0.00; $18,000

Question 7

Which of the characteristics listed below apply to a power of attorney?
a. Effective during the IRA owner’s lifetime
b. Effective if the IRA owner’s mental status is competent
c. Effective if the IRA owner’s mental status is incapacitated
d. Individual defines the scope
e. Court determines the scope
f. Individual defines the duration
g. Court determines the duration
h. Individual creates the power
i. Court creates the power

Answer 7

A. B. D. F. H.

Question 8

Which of the characteristics listed below apply to a guardian or conservator?
a. Effective during the IRA owner’s lifetime
b. Effective if the IRA owner’s mental status is competent
c. Effective if the IRA owner’s mental status is incapacitated
d. Individual defines the scope
e. Court determines the scope
f. Individual defines the duration
g. Court determines the duration
h. Individual creates the power
i. Court creates the power

Answer 8

A. C. E. G. I.

Question 9

Sue Jones, age 61, took a distribution from her Traditional IRA on June 25, 2023. On April 2, 2024, Sue realized that her withdrawal was reported incorrectly as an early distribution. What IRS forms will be needed to correct the reporting for her IRA distribution?

Answer 9

2023 Form 1099-R and 2023 Form 1096

Question 10

What distribution code is used to report an early distribution?

Answer 10

Code 1

Question 11

What IRS form should always accompany a corrected tax form?
a. Form 1040
b. Form 1042
c. Form 8606
d. None of the above

Answer 11

d. None of the above (form 1096 for paper filing)

Question 12

Sue Jones, age 61, took a distribution from her Traditional IRA on June 25, 2023. On April 2, 2024, Sue realized that her withdrawal was reported incorrectly as an early distribution. What IRS distribution code should be reported for Sue’s Form 1099-R?

Answer 12

Code 7

Question 13

John Wayne, age 39, took a distribution from his Roth IRA on January 30, 2023. John’s Social Security number is 111-11-2221.When he was reviewing the 2023 Form 1099-R that he received from Great Lake Financial Organization, he noticed that his Social Security number was incorrect; it was reported as 111-11-2222. How many tax forms will it take to complete this correction?

Answer 13

Two 2023 Forms 1099-R and one 2023 Forms 1096

Question 14

John Wayne, age 39, took a distribution from his Roth IRA on January 30, 2023. John’s Social Security number is 111-11-2221.When he was reviewing the 2023 Form 1099-R that he received from Great Lake Financial Organization, he noticed that his Social Security number was incorrect; it was reported as 111-11-2222.
How will the corrected form(s) be completed?

Answer 14

Two 2023 Forms 1099-R – one form should have the
Corrected
box marked, the wrong Social Security number listed, and $0.00 entered in Box 1, the other form should have the
Corrected
box unmarked and the correct Social Security number and distribution amount listed

Question 15

John Wayne, age 39, took a distribution from his Roth IRA on January 30, 2023. What distribution code is used to report John’s distribution?

Answer 15

Code J

Question 16

Fred Brown, age 42, is the beneficiary of his Uncle Ben’s Traditional IRA. Uncle Ben died July 14, 2023, at age 67. On October18, 2023, Fred took a total distribution from the IRA equaling$5,150. Fred grew concerned in April 2024 when he didn’t get a form reporting the distribution that he had received from his uncle’s IRA. On April 10, 2024, Fred went to Breezy Pines Financial,the custodian of the IRA, and questioned why he hadn’t received atax form. After reviewing the file, Breezy Pines Financial discovered that it had inadvertently reported the distribution under Uncle Ben’s name and Social Security number, with IRA distribution code 7.How should the distribution have been reported?

Answer 16

The distribution needs to be changed to report under Fred’s name and Social Security number, with distribution code 4.

Question 17

What is the penalty for failing to provide a 2023 Form 5498 to the IRS

Answer 17

$50 per failure

Question 18

What is the penalty for failing to timely file a 2023 Form 1099-R with the IRS ?
a. $50 per failure
b. Corrected within 30 days: $60 per failure; $630,500 maximum; $220,500 small business maximum
c. Corrected after 30 days but before August 1: $120 per failure; $1,891,500 maximum; $630,500 smallbusiness maximum
d. Corrected after August 1: $310 per failure; $3,783,000 maximum; $1,261,000 small business maximum

Answer 18

b. Corrected within 30 days: $60 per failure; $630,500 maximum; $220,500 small business maximum
c. Corrected after 30 days but before August 1: $120 per failure; $1,891,500 maximum; $630,500 smallbusiness maximum
d. Corrected after August 1: $310 per failure; $3,783,000 maximum; $1,261,000 small business maximum

Question 19

What is the penalty for failing to provide a 2023 Form 1099-R to IRA owners
a. $50 per failure
b. Corrected within 30 days: $60 per failure; $630,500 maximum; $220,500 small business maximum
c. Corrected after 30 days but before August 1: $120 per failure; $1,891,500 maximum; $630,500 smallbusiness maximum
d. Corrected after August 1: $310 per failure; $3,783,000 maximum; $1,261,000 small business maximum

Answer 19

b. Corrected within 30 days: $60 per failure; $630,500 maximum; $220,500 small business maximum
c. Corrected after 30 days but before August 1: $120 per failure; $1,891,500 maximum; $630,500 smallbusiness maximum
d. Corrected after August 1: $310 per failure; $3,783,000 maximum; $1,261,000 small business maximum

Question 20

What is the penalty for failure to provide a 2023 account statement to IRA owners

Answer 20

$50 per failure

Question 21

What is the penalty for failure to provide a 2023 fair market value statement to IRA owners

Answer 21

$50 per failure

Question 22

On July 11, 2024, Judy Spring, age 52, established a new Roth IRA at Life Savings Financial with a $5,000 contribution. On July 16,2024, Judy went back to Life Savings Financial and requested that her IRA be revoked. No earnings had accrued in her IRA. What amount should be reported in Box 2a?

Answer 22

$0.00 (1099-R Box 2a = Taxable Amount)

Question 23

On July 11, 2024, Judy Spring, age 52, established a new Roth IRA at Life Savings Financial with a $5,000 contribution. On July 16,2024, Judy went back to Life Savings Financial and requested that her IRA be revoked. No earnings had accrued in her IRA. What code should be listed in Box 7?

Answer 23

Code J (Roth IRA, under age 59 1/2)

Question 24

On July 11, 2024, Judy Spring, age 52, established a new Roth IRA at Life Savings Financial with a $5,000 contribution. On July 16,2024, Judy went back to Life Savings Financial and requested that her IRA be revoked. No earnings had accrued in her IRA. Will Judy receive a Form 5498 for 2024 reporting this contribution?

Answer 24

Yes

Question 25

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200. What amount should be reported in Box 2a?

Answer 25

$28,500 (1099-R Box 2a = Taxable Amount)

Question 26

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200. What amount should be reported in Box 4?

Answer 26

$2,850 (1099-R Box 4 = Federal Withholding amount)

Question 27

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200. What should be reported in Box 7 of the 1099-R?

Answer 27

Code 1

Question 28

On August 12, 2023, Justine, age 39, requested a distribution of$28,500 from her Traditional IRA at ABC Bank. She also elected to have 10 percent withheld for federal income taxes. She deposited the money into her checking account. On September 10, 2023, she entered Up North Financial to establish a new Traditional IRA with a rollover contribution of $28,500 (Justine made up the withheld amount out of pocket). The balance of her new Traditional IRA on December 31, 2023, was $30,200.
What documents should she have received?
a. Plan agreement
b. Disclosure statement
c. Financial disclosure
d. Rollover Certification Form
e. All of the above

Answer 28

e. All of the above

Question 29

What is the penalty for a F.I. that fails to give notice to recipients of the right to waive federal withholding on IRA distributions?

Answer 29

$100 for each failure (maximum $50k per calendar year)

Question 30

What is the penalty for failure to keep records necessary to report withholding to the IRS?

Answer 30

$50 for each IRA for which proper records were not kept.

Question 31

What four reports must a financial organization provide to an IRA owner? What is the deadline for each form?

Answer 31

1- fair market value statement - January 31st
2- form 1099-r January 31st
3- form 5498/account statement May 31st
4- required minimum distribution statement January 31st

Question 32

What two forms must a financial organization provide to the IRS? What is the deadline for each form?

Answer 32

1- form 1099-r February 28 paper, may 31st electronic
2- form 5498 May 31st

Question 33

What distribution code is used on form 1099-r to report a Roth IRA distribution to an IRA owner who is age 62 but has not satisfied the 5-year period?

Answer 33

Code T

Question 34

When are Financial organizations required to Value assets? The asset value is shown on which forms?

Answer 34

Annually as of December 31st (used for FMV & Form 5498)

Upon distribution of assets, reflected on form 1099-r