1. The deadline for a contribution for 2010?
    April 15, 2010. Exclude extensions.
  2. 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.
  3. 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.
  4. Can an IRA invest in insurance?
  5. 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.
  6. Can an IRA invest in collectibles?
    Generally, no (eg, artwork). But there are exceptions: platinum coins and gold/silver/platinum bullion.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. 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
  19. 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.
  20. 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).
  21. 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).
  22. 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.
  23. 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.
  24. 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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