Top 15 IRA Tax Facts to Know

Related: Top 12 RMD Tax Facts to Know

Individual retirement plans have long acted as tax-favored personal savings arrangements that allow clients to set aside money for retirement. A traditional individual retirement plan generally allows an individual to contribute both deductible (where eligible) and nondeductible payments to receive the benefit of tax-deferred buildup on income.

But rules regarding contributions, withdrawals and taxation can create confusion, depending on the individual client’s situation. Are you advising your clients correctly when it comes to their IRAs? In the gallery above are 15 important tax and financial planning questions and answers advisors should be aware of regarding IRAs, according to ALM’s Tax Facts Online.

(Graphics: Chris Nicholls/ALM)

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Top 15 IRA Tax Facts to Know

Related: Top 12 RMD Tax Facts to Know

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1. What is an individual retirement account?

2. What is an individual retirement annuity?

3. What are U.S. Individual Retirement Bonds?

4. What is a “deemed IRA”?

5. What information must be provided to a buyer of an IRA?

6. What is sequence of returns risk, and how can it affect a taxpayer’s retirement income strategy?

7. When are funds in an IRA taxed?

8. When are IRA funds transferred between spouses or incident to a divorce treated as taxable distributions?

9. Are IRA distributions subject to the 3.8% net investment income tax?

10. How are earnings on an IRA taxed?

11. Who may establish an IRA?

12. When must contributions to IRAs be made?

13. What is the difference between a Roth IRA and a traditional IRA?

14. Who is an “active participant” for purposes of IRA eligibility rules and deduction limits?

15. When can IRA contributions be withdrawn or reduced?

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Top 15 IRA Tax Facts to Know

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Related: Top 12 RMD Tax Facts to Know

More on this topic

1. What is an individual retirement account?

2. What is an individual retirement annuity?

3. What are U.S. Individual Retirement Bonds?

4. What is a “deemed IRA”?

5. What information must be provided to a buyer of an IRA?

6. What is sequence of returns risk, and how can it affect a taxpayer’s retirement income strategy?

7. When are funds in an IRA taxed?

8. When are IRA funds transferred between spouses or incident to a divorce treated as taxable distributions?

9. Are IRA distributions subject to the 3.8% net investment income tax?

10. How are earnings on an IRA taxed?

11. Who may establish an IRA?

12. When must contributions to IRAs be made?

13. What is the difference between a Roth IRA and a traditional IRA?

14. Who is an “active participant” for purposes of IRA eligibility rules and deduction limits?

15. When can IRA contributions be withdrawn or reduced?

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