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The Slott Report

Non-Sensical IRA and Roth IRA Items (Part 3 of 3)

I think we can all accept that the Tax Code is confusing. After all, it has to provide the rules for an extraordinarily vast array of circumstances. Sometimes though, the Code goes beyond merely confusing and borders on the bizarre. “Why would Congress do that?” you might ask yourself… and you’re not alone. While there are more than just a handful of bizarre items in the Tax Code, we’ve chosen to highlight three of them that relate directly to IRAs.

Private Letter Rulings for Relief from Missing 60-Day Rollover Rule

Private letter rulings (PLRs), are written decisions by the Internal Revenue Service (IRS) in response to taxpayer requests for guidance. A private letter ruling binds only the IRS and the requesting taxpayer and may not be cited or relied upon as precedent by other individuals. However, if the subject matter addressed in a PLR has broad application to the general public, the IRS can redact its text and reissue it as a revenue ruling, which becomes binding on all taxpayers and the IRS.

You MUST Have Earned Income to Contribute to an IRA

Prior to April 18, 2011, several articles posted in The Slott Report contained reminders about the importance of making your 2010 IRA contribution. Among other things, we indicated that $5,000 was the maximum amount you could contribute to your IRA for 2010, with an additional "catch up" contribution of $1,000 if you were age 50 or older on December 31, 2010. Click to read more about what is compensation for IRA and Roth IRA contribution eligibility.

Nonsensical IRA and Roth IRA Items (Part 2 of 3)

I think we can all accept that the Tax Code is confusing. After all, it has to provide the rules for an extraordinarily vast array of circumstances. Sometimes though, the Code goes beyond merely confusing and borders on the bizarre. “Why would Congress do that?” you might ask yourself… and you’re not alone. While there are more than just a handful of bizarre items in the Tax Code, we’ve chosen to highlight three of them that relate directly to IRAs.

Form 5329: Additional Taxes on Qualified Plans and Other Tax-Favored Accounts

What is Form 5329? Its title is "Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts." You should file the form whenever you miss a required distribution, take a distribution before age 59 ½ when one of the penalty exceptions does not apply, and when you make excess contributions. Those are most of the reasons to file the form. The form calculates any additional taxes owed (what are often called penalties) for certain IRA transactions. Not filing the form could only make things much, much worse.

Disability Exception to the 10% Early Distribution Penalty

You are not yet 59 1/2 and have become disabled. You want to take funds out of your IRA. Can you escape the 10% early distribution penalty?

Post-Death IRA Distribution Rules

There is often a lot of confusion when it comes to the post-death IRA distribution rules. Frequently, beneficiaries and/or their advisors believe they are subject to what is called the 5-year rule – meaning they have to empty the inherited account within 5 years after the date of death - when in fact, they may actually have much longer to do so.

Can YOU Borrow from YOUR IRA?

The big issue in the news these days is how to resolve the "debt ceiling" issue. In essence, our legislators are just trying to figure out how much of a loan, as a nation, we can take. As the events of the recent past have taught us, borrowing can be a dangerous game, but when it comes to IRAs, borrowing can be more than just dangerous. It can be a fatal error that can decimate a lifetime of savings.

Retirement Comics: One of the Perks

The main perk of retirement is freedom. The freedom to sleep in late. The freedom to play golf five days a week. The freedom to talk about the laughs and tears of the last 30 years. This comic illustrates one of the great benefits of retirement...well, along with a safe and secure stack of money to afford you a comfortable, enjoyable trip through your golden years.

Retirement Comics: Be Prepared in Any Situation

Retirement is sometimes, especially in this economic climate, NOT planned. That is why proactive planning at a young age (when you start working) is so important.

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