Unit 18

Question 1

Qualified plan

Answer 1

An employer-sponsored plan, such as a pension, 401(k), or 403(b), where the contributions are made with pre-tax dollars and earnings in the account grow without any tax (tax-deferred) until the funds are withdrawn.

Question 2

Nonqualified plan

Answer 2

An employer-sponsored plan, such as a deferred compensation plan, where there are no tax advantages other than that the payout is not received until sometime later when the individual should be in a lower tax bracket. Another advantage is that the employer can discriminate between employees.

Question 3

What date was alimony (divorce money) decreed not compensation toward IRAs

Answer 3

December 31, 2018

Question 4

What is Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) responsible for

Answer 4

Catch-up provisions

Question 5

Can you make an IRA contribution over the limit in one year if you received an extension on taxes

Answer 5

No

Question 6

How much tax are annual IRA contributions exceeding the maximum allowed are subject to

Answer 6

6%

Question 7

Items deducted from Adjusted Gross Income (AGI) (4)

Answer 7

1. Traditional IRA contribution
2. Alimony paid as part of a pre-January 1, 2019, divorce decree;
3. Self-employment tax
4. Penalties paid on early withdrawal from a savings account

Question 8

What is not included in AGI

Answer 8

Tax-exempt income from municipal securities

Question 9

Ineligible IRA investments (5)

Answer 9

Collectibles, life insurance contracts, Tax-free municipal bonds, municipal bond funds, and municipal bond UITs

Question 10

Who is not included in the prohibited persons category

Answer 10

Sibling

Question 11

Who uses SEP IRAs

Answer 11

Small businesses