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The deadline for a contribution for 2010?
April 15, 2010. Exclude extensions.
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What is compensation for an IRA?
Wages/salaries, commissions, self-employment income, alimony/separate maintenance payments. Does not include: rental income, interest income, dividend income, pension income, annuity income, share of S-Corp income, deferred income, unemployment comp, foreign earned income excluded from income.
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What are the contribution limits for an IRA?
Lessor of $5,000 or compensation received. If 50 or over, can add $1,000. Cannot contribute in the year you reach 70 1/2.
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Can an IRA invest in insurance?
No.
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To establish an IRA, it must be:
Fully vested at all times, assets cannot be commingled except in common trust or common investment fund, cannot be invested in insurance, must be distributed on April 1 for the year following turning 70 1/2.
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Can an IRA invest in collectibles?
Generally, no (eg, artwork). But there are exceptions: platinum coins and gold/silver/platinum bullion.
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What are prohibted transactions for an IRA?
Sell property to it, use it as security for a loan, buy property for the taxpayer's personal use, borrowing from it. If someone does take an action, then the IRA goes away and everything is taxable.
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What is an IRA rollover?
You take out money from one plan and then invest it in another. Requirements: must be done within 60 days (or else there are taxes/penalty); cannot be deducted; may not substitute assets; must be to another qualified plan (IRA, 403b, 457). Not allowed for: minimum distributions, hardship distributions.
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Requirements for a spousal IRA:
Spouse may not have income but must have less than other spouse; file joint return. Finally, there is no joint IRA (remember, it's individual). Contribution amount is lessor of sum of comp of spouse, reduce by IRA contribution or $5,000.
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What is the penalty for excess IRA contributions?
This could be for those who contribute when 70 1/2 or over; or are active participants in a qualified plan. The penalty is 6% of the excess if not cured by the following tax year + extensions. If cured, my still be subject to a 10% distribution penalty if the excess contribution earned income. This would also be included in gross income.
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What happens to the basis in the IRA at death?
It attaches to the IRA (would be nondeductible contributions). Thus, a spouse can inherit an IRA and the basis.
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How can a spouse transfer an IRA to the other spouse?
Direct rollover, changing the name on the account, withdraw funds/transfer into another account. This often happens in divorce.
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When is a 10% penalty imposed on an IRA?
If a distribution is made before reaching 59 1/2. However, there are exceptions: distribution is in the form of an annuity; unreimbursed medical expenses (over 7.5% of AGI); not more than qualified education expenses; distribution due to IRS levy; disabled; death; qualified first-time hombuyer distribution; unemployed health care premium; payments under a qualified domestic relations order; US military call to duty; distributions made to employee after separes from reaching 55.
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If reach 70 1/2, when must make minimum distributions?
By April 1 of the following year. But must also include the payment from last year. If payments not made, there is a 50% excise tax.
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When are IRA contributions fully deductible--regardless of income?
When single, you are not covered by an employer plan. Or, if married, both spouses, both are not covered by a plan.
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You are covered by an employer plan. How much can you deduct of your IRA contribution?
- Single: phase out $55,000 - $65,000
- MFJ: $89,000 - $109,000
- Separate: $0-$10
(MAGI - Min phaseout amt)/(max phaseout amt - min phaseout amt) X $5,000. Round up to nearest $10. $200 or more is allowed.
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Your spouse is covered by a qualified plan but you are not. What can you deduct of your contribution for an IRA?
Phase out: $166,000 - $176,000
(MAGI - Min phaseout amt)/(max phaseout amt - min phaseout amt) X $5,000. Round up to nearest $10. $200 or more is allowed.
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What are the contribution limits for a Roth IRA?
- They are based on income. Phaseouts:
- Single: $105,000-$120,000
- MFJ: $166,000 to $176,000
- Separate: $0-$10,000
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What is added to AGI to get to MAGI for a Roth IRA?
Traditional IRA deduction, student loan interest deduction, tuition/fees deduction, foreign earned income/housing exclusion, foreign housing deduction, exclusion of bond interest, exclusion of employer-provided adoption benefits, domestic production activities deduction.
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What is a qualified distribution of a Roth IRA?
- Not subject to tax. So long as meet five-year holding period and one of the following:
- on or after date when reach 59 1/2, made to a beneficiary (or estate) on or after individual's deaht, attributed to the individual's being disabled, or distributed to pay for "qualified first-time homebuyer's expenses." Qualified distributions are done first, then unqualfied ones (will be subject to 10% penalty).
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Requirements for a rollover of an IRA to a Roth?
AGI must not exceed $100,000; MFJ; can be rescinded until the time of the filing of a return of the following year (including extensions).
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What is a coverdell education savings account?
Similar to an IRA but for education. For family members: sons, daughters, brothers, sisters, nephews, nieces, in-laws.
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Income limits for Coverdell's?
MFJ: MAGI below $190,000 can contribute $2,000 per beneficiary per year. Phaseouts is $190,000 to $220,000. It's $95,000-$110,000 for single.
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Coverdell contributions are...
Not deductible. But earnings are tax-free. Distributions subject to 10% pentaly and are included in gross income. Qualified expenses include: tuition, books, fees, supplies, equipment. Can include room/board if meet federal requirements. Funds must be used by age 30.
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