Download as PDF, PPTX
Uploaded byNAFCU Services Corporation
Understanding IRA Contributions: From Deadlines to Deductibility Rules | Ascensus
The document outlines the rules and eligibility for contributions to traditional and Roth IRAs, including contribution limits and deadlines. It details deductibility criteria based on income levels, as well as special provisions for military personnel regarding contribution deadlines and reporting requirements. Additionally, it highlights penalty-free strategies such as tax credits available for certain IRA contributions.
More Related Content
Similar to Understanding IRA Contributions: From Deadlines to Deductibility Rules | Ascensus
Understanding IRA Contributions: From Deadlines to Deductibility Rules | Ascensus
- 1. IRA Contributions February 2011 (030111-v29) ©2011 Ascensus, Inc.
- 2. Course Objectives • Listeligibility rules for regular, spousal, and catch-up contributions to Traditional and Roth IRAs • Explain the contribution limit for an individual • State the contribution deadline • Determine if an IRA contribution is deductible ©2011 Ascensus, Inc. 1
- 3. Course Objectives (continued) •Understand when certain individuals may receive a tax credit for IRA contributions • Accurately report regular, spousal, and catch-up contributions to Traditional and Roth IRAs • Explain the IRA contribution deadline for certain military personnel ©2011 Ascensus, Inc. 2
- 4. Traditional IRA Contributions Regular Catch-Up Spousal SEP Traditional IRA Transfer Recharacterization Rollover ©2011 Ascensus, Inc. 3
- 5. Traditional IRA Contribution Eligibility RegularContribution Spousal Contribution • Under 70½ year • Under 70½ year • Has earned income • Couple has earned income • Married, filing joint federal tax return ©2011 Ascensus, Inc. 4
- 6. Traditional IRA ContributionEligibility (continued) Catch-Up Contribution • Eligible for regular or spousal Traditional IRA contribution • Has earned income (or couple has earned income if joint filer) to support additional contribution • Attain age 50 before end of tax year ©2011 Ascensus, Inc. 5
- 7. Traditional IRA ContributionLimits Maximum individual Maximum catch-up Year contribution (regular/spousal) contribution 2010 $5,000* $1,000* 2011 $5,000* $1,000* *Reduced by any Roth IRA contributions made for the same year ©2011 Ascensus, Inc. 6
- 8. Polling Question Do youuse an IRA eligibility form? ©2011 Ascensus, Inc. 7
- 9. Traditional IRA Contribution Deductibility Is the IRA owner an Is the IRA owner an active participant? active participant? No Yes Is the IRA owner Is the IRA owner The deductibility of The deductibility of married to an active married to an active the contribution the contribution participant? participant? depends on MAGI depends on MAGI No Yes The deductibility of the The deductibility of the The contribution The contribution contribution depends contribution depends is deductible is deductible on MAGI on MAGI ©2011 Ascensus, Inc. 8
- 10. Traditional IRA ActiveParticipant MAGI Limits Married filing a Married filing a Tax Year Single filer joint return separate return 2010 $89,000 – $109,000 $0 – $10,000 $56,000 – $66,000 2011 $90,000 – $110,000 $0 – $10,000 $56,000 – $66,000 ©2011 Ascensus, Inc. 9
- 11. Traditional IRA NonactiveParticipant MAGI Limits 2010 2011 Active Participant: $89,000 – $109,000 $90,000 – $110,000 Nonactive Participant: $167,000 – $177,000 $169,000 – $179,000 ©2011 Ascensus, Inc. 10
- 12. Deductibility Formula maximum contribution includingcatch-up contributions X ( maximum deductibility threshold – MAGI maximum deductibility threshold – minimum deductibility threshold ) = deduction limit ©2011 Ascensus, Inc. 11
- 13. Roth IRA Contributions Regular Catch-Up Spousal Recharacterization Roth IRA Rollover Conversion Transfer ©2011 Ascensus, Inc. 12
- 14. Roth IRA ContributionEligibility Regular Contribution Spousal Contribution • No age restriction • No age restriction • Has earned income • Couple has earned • MAGI within limits income • Married, filing joint federal tax return • MAGI below or within limits ©2011 Ascensus, Inc. 13
- 15. Roth IRA ContributionEligibility Catch-Up Contribution • Eligible for regular or spousal Roth IRA contribution • Has earned income (or couple has earned income if joint filer) to support additional contribution • Attain age 50 before end of tax year ©2011 Ascensus, Inc. 14
- 16. Roth IRA ContributionLimits Maximum individual Maximum catch-up Year contribution (regular/spousal) contribution 2010 $5,000* $1,000* 2011 $5,000* $1,000* *Reduced by any Traditional IRA contributions made for the same year ©2011 Ascensus, Inc. 15
- 17. Roth IRA ContributionEligibility MAGI Limits Married filing a Married filing a Tax Year Single filer joint return separate return 2010 $167,000 – $177,000 $0 – $10,000 $105,000 – $120,000 2011 $169,000 – $179,000 $0 – $10,000 $107,000 – $122,000 ©2011 Ascensus, Inc. 16
- 18. Tax Credit • Nonrefundable • Offsets cost of first $2,000 contributed to an IRA • Not to exceed $1,000 annually • PPA makes it permanent • Possible COLAs in future years ©2011 Ascensus, Inc. 17
- 19. Tax Credit Eligibility • Attain age 18 by end of taxable year • Have AGI within limits • Not a dependent • Not a full-time student ©2011 Ascensus, Inc. 18
- 20. Contribution Deadline January 1 April 15 2010 2011 NOTE: April 15, 2011, is a legal holiday; therefore, IRA owners have until April 18, 2011, to make 2010 contributions. IRA owners who file with the Andover, MA, IRS Service Center have until April 19, 2011, to make 2010 contributions. ©2011 Ascensus, Inc. 19
- 21. Contribution Reporting • Contributioninformation reported to IRA owner and IRS on Form 5498 • Due by May 31 • File with IRS on paper or electronically • Submit paper Forms 5498 to IRS with Form 1096 • Make corrections as soon as possible ©2011 Ascensus, Inc. 20
- 22. Contribution Reporting –IRS Form 5498 ©2011 Ascensus, Inc. 21
- 23. Fair Market ValueStatement • Use Dec. 31 value • Due to IRA owner or beneficiary by Jan. 31 ©2011 Ascensus, Inc. 22
- 24. Annual Account Statement •Contribution information • Use own format or Form 5498 • Due to IRA owner or beneficiary by May 31 ©2011 Ascensus, Inc. 23
- 25. Polling Question Do youuse Form 5498 to satisfy the annual account statement requirement? ©2011 Ascensus, Inc. 24
- 26. Contribution Reporting IRS Form 1040 Form 8606 Form 5498 Annual Account Statement IRA Owner and FMV Statement Financial Organization ©2011 Ascensus, Inc. 25
- 27. Military Personnel IRAContributions • HERO Act allows individuals to use nontaxable combat pay to fund IRAs • File separate From 5498 using special reporting requirements for military personnel in designated combat zones ©2011 Ascensus, Inc. 26
- 28. Military Personnel Postponed ContributionDeadline • Armed forces personnel in combat zones, hazardous duty areas, and contingency operations • Certain Red Cross personnel, correspondents, and civilians serving qualified areas • Merchant Mariners (Iraqi Freedom) • Spouses and dependents of all of the above ©2011 Ascensus, Inc. 27
- 29. Military Personnel Postponed ContributionDeadline (continued) Date left combat zone or hospitalization + 180 days + days left to contribute from date IRA owner entered qualifying area ____________________________________ = Deadline ©2011 Ascensus, Inc. 28
- 30. Military Personnel Postponed ContributionDeadline Example Entered Left combat 2010 contribution combat zone zone deadline 12/15 4/15 9/2 7/1 2010 2011 2012 122 days left to 302 days deposit 2010 (180 + 122) to make contribution 2010 contribution ©2011 Ascensus, Inc. 29
- 31. Combat Zone ContributionReporting Two Methods 1. Use applicable prior-year Form 5498 for year contribution is for or 2. Use current-year Form 5498 for prior-year contribution – Contribution amount in Box 13a – Contribution tax year in Box 13b – Applicable military operation indicator code in Box 13c ©2011 Ascensus, Inc. 30
- 32. Combat Zone ContributionReporting Method 2 Example – Current-Year Form 5498 4,000 2008 IF ©2011 Ascensus, Inc. 31
- 33. Qualified Reservist Repayments • Created by PPA • May recontribute distributions to an IRA within two years following the end of the active duty period • Repayments are recontributed as after-tax dollars ©2011 Ascensus, Inc. 32
- 34. Qualified Reservist Repayment Reporting •Enter contribution amount in Box 14a and enter indicator code “QR” in Box 14b of 2010 Form 5498 • IRA owner may need to amend tax return and file Form 8606 ©2011 Ascensus, Inc. 33
- 35. HEART Act • Individualsmay roll over military death gratuity and Servicemembers’ Group Life Insurance payments to Roth IRAs and Coverdell ESAs • Report the rollover contribution amount in Box 2 of Form 5498 if death occurred after June 17, 2008, and amounts deposited within one year • Employer-provided differential pay treated as wages for retirement plan purposes • Allows employers to treat former employees killed or disabled on active duty as having returned to employment ©2011 Ascensus, Inc. 34
- 36. Contact... Tammy Schultz, CISP, QKA Ascensus 800-346-3860 tammy.schultz@ascensus.com www.nafcu.org/ascensus Ascensus® and the Ascensus logo are registered trademarks of Ascensus, Inc. All rights reserved. ©2011 Ascensus, Inc. 35