IRA Owner Tax Forms and You

Transcription

1 IRA Owner Tax Forms and You

2 Learning Objectives Determine which tax forms an IRA owner must complete when certain IRA activity occurs Understand which IRS penalty taxes may apply to IRA owners 2

3 Nontaxable Traditional IRA Distributions

4 IRA-to-IRA Rollover 60-day rule One-per-12-month rule IRA IRA 4

5 Qualified Charitable Distribution IRA 5

6 HSA Funding Distribution IRA HSA 6

7 IRA-to-IRA Rollover Example Jesse, age 61, received a $28,000 distribution (he waived withholding) from his Traditional IRA on June 15, He deposited $28,000 into his Traditional IRA as a rollover on July 16,

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11 HSA Funding Distribution Example Cooper recently opened an HSA. He used a qualified HSA funding distribution to make a contribution. Cooper completed the IRA Withdrawal Authorization form to document the IRA distribution. The financial organization did not withhold on the distribution and deposited the contribution directly into the HSA. 11

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13 HSA Funding Distribution Example Document the qualified HSA funding distribution on Form 1040 Must remain HSA eligible for subsequent 12 months 13

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15 HSA Funding Distribution Example Financial organization reports the contribution on Form 5498-SA in Cooper s name and SSN 15

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17 10% Early Distribution Penalty Tax

18 10% < 59½ 18

19 Form 1040 Line 59 Instructions 19

20 10% Early Distribution Penalty Tax Example Daisy, age 31, withdrew $15,000 from her Traditional IRA (waived withholding) on November 12, 2017, to buy a Jeep. 20

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22 10% Early Distribution Penalty Tax Example Includes $15,000 in her taxable income for the tax year Informs the IRS of early distribution and pays additional 10% early distribution penalty tax of $1,500 22

23 NO 23

24 Early Distributions Not Subject to 10% Early Distribution Penalty Tax

25 Higher education expenses First-time homebuyer expenses Medical expenses Health insurance premiums following unemployment Qualified reservist distributions 25

26 Early Distribution With No Penalty Tax Example Rosco, age 54, withdrew $12,000 from his Traditional IRA on September 12, 2017, to pay his son s tuition. 26

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28 Early Distribution With No Penalty Tax Example Completes IRS Form 5329 to claim the 10% early distribution penalty tax exception Distribution reported on Form 1040, line 15b, as a taxable distribution Do not add a 10% penalty tax to line 59 of IRS Form

29 2017 Form 5329 Instructions section 29

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32 Traditional IRA 50% Excess Accumulation Penalty Tax

33 RMD = 50% penalty Financial organization missed distribution IRA owner forgot distribution 33

34 Excess Accumulation Penalty Tax Example Emma, age 74, receives her RMD in quarterly payments. On January 17, 2018, Hazzard County Financial discovered that it had not disbursed her final 2017 $2,381 quarterly RMD payment. 34

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36 Excess Accumulation Penalty Tax Example Complete income tax return and file Form 5329 Include letter asking for the waiver and stating the reason for seeking one 36

37 (RC 2,381.00) 37

38 Traditional IRA Deductible Contribution

39 Traditional IRA Deduction Example Lulu and Jefferson file joint tax return MAGI = $87,600 Each contributed $5,500 for 2017 Both eligible for full deductions 39

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43 Traditional IRA Nondeductible Contribution

44 Traditional IRA Nondeductible Contribution Example Lucas, age 35, single filer MAGI = $173,310 Active participant Made a $5,500 contribution Lucas does not qualify for an IRA deduction 44

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46 Traditional IRA Nondeductible Contribution Example Must file IRS Form 8606 to report the nondeductible Traditional IRA contribution 46

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48 Withdrawing Traditional IRA Nondeductible Contributions

49 Withdrawing Traditional IRA Nondeductible Contributions Example Enos, age 62, received his first Traditional IRA distribution of $6,500 (elected 15% withholding) $47,200 = deductible contributions $12,000 = nondeductible contributions for 2015 and

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51 Withdrawing Traditional IRA Nondeductible Contributions Example Complete Form 8606 to document the distribution of nondeductible assets Complete Form 1040, line 15a 51

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54 Roth IRA Distribution

55 Roth IRA Distribution Example Beauregard, age 33, received his first Roth IRA distribution of $7,500 on November 3, 2017 $30,000 = regular Roth IRA contributions from 2002 to

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57 Roth IRA Distribution Example Complete Form 8606 to document the Roth IRA distribution Complete Form 1040, line 15a 57

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60 IRA Owner Tax Forms Exercise Page 23 60

61 IRA Owner Tax Forms Exercise Answers 1. Form Form 5329 and Form Form Form 8606 and Form Form Form 5329 and Form Form 8606 and Form

62 Questions?

63 Thank you for attending IRA Owner Tax Forms and You We Appreciate Your Opinion Please complete the electronic course survey for this course located on the Ascend 2018 mobile app. Still need to download the app? Paper versions of the survey are located at the Business Center.

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