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1.
There are conditions under which you can escape paying taxes on your IRA contributions.
False. Uncle Sam will tax them in the year you put them in or when you take them out.
2.
This year Robert, age 40, contributed $1,000 more than the allowed limit to his IRA. How much will he have to pay in penalty taxes?
$60. He must pay 6 percent of the excess. Six percent of $1,000 is $60.
3.
If you want to contribute to your IRA for this year, you have until December 31 to do it.
False. You have until April 15 (or the official tax day) of NEXT year to contribute.
4.
Which of the following is not allowed to fund an IRA?
Cash value life insurance. Neither this nor collectibles are allowed as IRA investments.
5.
If you are covered by an employer-sponsored retirement plan, you must use your ________ to figure out how much of your IRA contributions you can deduct from your taxable income.
Adjusted gross income. Adjusted gross income determines how eligible you are to deduct your contributions.
6.
The amount of IRA contributions that a married couple filing their taxes jointly can deduct from their taxable income is limited by _______.
Both income and participation in an employee retirement plan. If at least one spouse participates in an employer-sponsored plan, then the amount of contribution eligible for deduction is further limited by income.
7.
IRA funds that are rolled over must be done so within _______ days.
60. If they are not rolled over within 60 days, the funds lose their tax-deferral.
8.
Mary is 76 years old and was required to withdraw $8,000 from her traditional IRA last year. She withdrew only $6,000 and did not attempt to correct her mistake. How much of a penalty will she be charged?
$500. The penalty (starting in 2023) is one-quarter of what one does not withdraw. Since Mary did not withdraw $2,000, she will be penalized $500.
9.
Premature withdrawals and insufficient distributions from individual retirement accounts may be taxed.
True. You can be penalized for them.
10.
The amount of your IRA contributions that you can deduct from your taxable income begins to be phased out at a certain level of income.
True. Once you reach a certain level defined by the IRS, your deductibility begins to drop.