IRA Withholding & Portability

Question 1

Carl is a U.S. citizen who has provided you with a completed IRS Form W-4P and has elected to waive federal income tax withholding. Although Carl has provided you with a post office box as a mailing address, he has not provided you with a U.S. home address. May Carl elect out of the 10% federal income tax withholding?

Answer 1

No

Question 2

Dale has chosen to receive a distribution equal to the amount of his required minimum distribution on December 1 of each year. On December 1, 2023, Dale elected to have 25% withheld for federal income taxes on his distribution. On November 15, 2024, Dale received a withholding election in the mail. Dale failed to return the election form to your financial organization before his distribution on December 1, 2024. At what rate should you withhold for federal income taxes on Dale’s December 1, 2024, distribution?

Answer 2

25%

Question 3

Morgan has arranged with his financial organization to have his RMD mailed to him every December. He also has elected to waive withholding on his distributions. What withholding notice requirement does the financial organization have to meet? When does this requirement have to be met?

Answer 3

The financial organization must send Morgan a withholding notice once per year, but no more than six months before the distribution.

Question 4

Are Traditional IRA distributions generally taxable?

Answer 4

Yes – earnings and deductible contributions are subject to income tax

Question 5

Constructive receipt of the assets, 60-day rule, one-per-12-monthrule, movement between the same IRA type, irrevocable designation, RMD restriction, and a reportable transaction are characteristics that apply to which type of method for moving IRA assets to an IRA?

Answer 5

Rollover

Question 6

No constructive receipt of the assets, no 60-day rule, no one-per-12-month rule, movement between the same IRA type, no RMD restriction, and not a reportable transaction are characteristics that apply to which type of method for moving IRA assets to an IRA?

Answer 6

Transfer

Question 7

If a Traditional IRA owner is age 73 or older, how does this individual’s distribution status affect her ability to rollover assets between Traditional IRAs?

Answer 7

The RMD may not be rolled over.

Question 8

If an IRA owner has three Roth IRAs at three different financial organizations, how many transfers may he complete before December 31, 2024?

Answer 8

Unlimited

Question 9

If an IRA owner has a Traditional IRA at Alpha Financial Organization and a Roth IRA at Beta Financial Organization, how many transfers may he transact before December 31, 2024?

Answer 9

Unlimited

Question 10

If an IRA owner has three Roth IRAs at three different financial organizations, how many rollovers may he complete before December 31, 2024?

Answer 10

One

Question 11

If an IRA owner has a Traditional IRA at Alpha Financial Organization and a Roth IRA at Beta Financial Organization, how many rollovers may he complete before December 31, 2024?

Answer 11

One

Question 12

Friendly Financial Organization is requesting a transfer of Sarah Parker’s Roth IRA from Treetop Financial Organization. Friendly Financial Organization is a custodian. How should Treetop Financial Organization title the check for the transfer?

Answer 12

Friendly Financial Organization as custodian of Sarah Parker’s Roth IRA

Question 13

Nancy is leaving her employer and would like to move all of her 401(k) plan assets to her existing Traditional IRA at your financial organization. If Nancy doesn’t want access to the assets, which method for rolling over qualified retirement plan assets to a Traditional IRA should she use?

Answer 13

Direct rollover

Question 14

Constructive receipt of the assets, 60-day rule, no one-per-12-month rule, mandatory 20 percent federal withholding, and a reportable transaction are characteristics that apply to which typeof method for rolling over qualified retirement plan assets to anIRA?

Answer 14

Indirect rollover

Question 15

No constructive receipt of the assets, no 60-day rule, no one-per-12-month rule, no mandatory 20 percent federal withholding, and a reportable transaction are characteristics that apply to which typeof method for rolling over qualified retirement plan assets to anIRA?

Answer 15

Direct rollover

Question 16

Why must financial organizations report distributions and rollover contributions to the IRS and the IRA owner?

Answer 16

d. Assets not properly rolled over are subject to income tax and a penalty tax.

Question 17

What is the advantage to a transfer?

Answer 17

Unlimited number of transactions

Question 17

What is the advantage to a rollover?

Answer 17

Constructive receipt of the assets

Question 18

Which type of assets are allowed to be moved from an eligible retirement plan to a Traditional IRA by the plan participant?

Answer 18

Pre-tax and after-tax assets

Question 19

Which method may an individual use to move assets from an employer-sponsored retirement plan to a Roth IRA?

Answer 19

Direct rollover or indirect rollover

Question 20

What is the tax consequence (including any fees) if an individual moves pre-tax assets from an employer-sponsored retirement plan to a Roth IRA?

Answer 20

The assets are always subject to income tax, and if the individual has constructive receipt of the assets, to 20 percent mandatory federal withholding.

Question 21

Steve Hill has two Roth IRAs, one at Winter Financial Organization and one at Spring Financial Organization. He transfers the Roth IRA from Winter Financial Organization to his Roth IRA at Summer Financial Organization on April 26. On May 6, Steve comes to you and wants to transfer his Roth IRA from Spring Financial Organization to you at Fall Financial Organization. May he do this?

Answer 21

Yes

Question 22

What is the time limit for an IRA owner to complete a transfer?

Answer 22

There is no time limit

Question 23

Which of the characteristics listed below apply to an indirect rollover from a Traditional IRA to a retirement plan?
a. No withholding election required
b. Code 1 or code 7 on Form 1099-R
c. Check issued in name of receiving plan for the benefit of the individual
d. 60-day rule applies
e. Withholding election required, although individual may waive withholding
f. Code G on Form 1099-R
g. Check issued in name of IRA owner
h. 60-day rule not applicable

Answer 23

b. Code 1 or code 7 on Form 1099-R
d. 60-day rule applies
e. Withholding election required, although individual may waive withholding
g. Check issued in name of IRA owner

Question 24

Which of the characteristics listed below apply to a direct rollover from a Traditional IRA to a retirement plan?
a. No withholding election required
b. Code 1 or code 7 on Form 1099-R
c. Check issued in name of receiving plan for the benefit of the individual
d. 60-day rule applies
e. Withholding election required, although individual may waive withholding
f. Code G on Form 1099-R
g. Check issued in name of IRA owner
h. 60-day rule not applicable

Answer 24

a. No withholding election required
c. Check issued in name of receiving plan for the benefit of the individual
f. Code G on Form 1099-R
h. 60-day rule not applicable

Question 25

Which of the characteristics listed below apply to a direct rollover from an employer-sponsored retirement plan to an IRA?
a. Mandatory 20 percent federal income tax withholding
b. No mandatory withholding
c. Plan administrator responsible for determining rollover eligibility
d. IRA owner responsible for rollover eligibility determination
e. Participant has constructive receipt of assets
f. No constructive receipt of assets
g. 60-day rule
h. No 60-day rule

Answer 25

b. No mandatory withholding
c. Plan administrator responsible for determining rollover eligibility
f. No constructive receipt of assets
h. No 60-day rule

Question 26

Which of the characteristics listed below apply to an indirectrollover from an employer-sponsored retirement plan to an IRA?
a. Mandatory 20 percent federal income tax withholding
b. No mandatory withholding
c. Plan administrator responsible for determining rollover eligibility
d. IRA owner responsible for rollover eligibility determination
e. Participant has constructive receipt of assets
f. No constructive receipt of assets
g. 60-day rule
h. No 60-day rule

Answer 26

a. Mandatory 20 percent federal income tax withholding
d. IRA owner responsible for rollover eligibility determination
e. Participant has constructive receipt of assets
g. 60-day rule

Question 27

A 53-year-old IRA owner takes a distribution of $10,000 from her Traditional IRA and does not have an early distribution penalty tax exception. How much is the penalty & tax if the entire amount is rolled over within 60 days?

Answer 27

Any amount up to $10,000 that is properly rolled over within 60 days is tax-and penalty-free.