IRA Withholding & Portability Flashcards
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?
No
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?
25%
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?
The financial organization must send Morgan a withholding notice once per year, but no more than six months before the distribution.
Are Traditional IRA distributions generally taxable?
Yes – earnings and deductible contributions are subject to income tax
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?
Rollover
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?
Transfer
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?
The RMD may not be rolled over.
If an IRA owner has three Roth IRAs at three different financial organizations, how many transfers may he complete before December 31, 2024?
Unlimited
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?
Unlimited
If an IRA owner has three Roth IRAs at three different financial organizations, how many rollovers may he complete before December 31, 2024?
One
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?
One
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?
Friendly Financial Organization as custodian of Sarah Parker’s Roth IRA
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?
Direct rollover
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?
Indirect rollover
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?
Direct rollover
Why must financial organizations report distributions and rollover contributions to the IRS and the IRA owner?
d. Assets not properly rolled over are subject to income tax and a penalty tax.
What is the advantage to a transfer?
Unlimited number of transactions
What is the advantage to a rollover?
Constructive receipt of the assets
Which type of assets are allowed to be moved from an eligible retirement plan to a Traditional IRA by the plan participant?
Pre-tax and after-tax assets
Which method may an individual use to move assets from an employer-sponsored retirement plan to a Roth IRA?
Direct rollover or indirect rollover
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?
The assets are always subject to income tax, and if the individual has constructive receipt of the assets, to 20 percent mandatory federal withholding.
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?
Yes
What is the time limit for an IRA owner to complete a transfer?
There is no time limit
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
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
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
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
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
b. No mandatory withholding
c. Plan administrator responsible for determining rollover eligibility
f. No constructive receipt of assets
h. No 60-day rule
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
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
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?
Any amount up to $10,000 that is properly rolled over within 60 days is tax-and penalty-free.
