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Appleby’s IRA Quick Reference Guide Booklet IRA Guide: 2024 edition Includes free updates for 2024.
Please see Table of Contents below
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See Table of Contents below.
"Denise Appleby has created charts summarizing Roth vs. traditional IRA, portability (what type of plan can be rolled into what other type of plan), and more. I wish everyone who answers an 800 number at the big financial firms had these charts, so there would be fewer incidents of erroneous advice." ~ Natalie B. Choate, Esq.
Contents
General Disclaimer and Copyright a
About the Author c
What’s New for 2024 1
∙ Quick Reference: Substantially Equally Periodic Payments/SEPP/72(t): Quick reference Guide 1
∙ IRA Beneficiary Options: Eligible Designated Beneficiary & Designated Beneficiary under the SECURE Act, as explained by the proposed RMD regulations that were published on February 24, 2022. 1
∙ IRS Notice 2023-53: IRS Waives Excise Tax for 2021 and 2022 RMDs for beneficiaries subject to the 10-year rule 2
∙ SECURE Act 2.0 Made Changes to RMD Age and Other IRA and employer plan rules 2
Reminders- Recent Changes to IRA Rules and Regulations 3
Changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) 3
A Summary of the CARES Act’s Provisions for RMD Waivers, Coronavirus Related Distributions and Loans 5
IRS Form 1099-R and Form 5498 Changes 9
IRS Publishes New RMD Tables: These are effective 2022 and after 10
1. Summary of Operational Procedures for Setting Up Your IRA 12
How to set up your IRA 12
Your Right to Revoke Your IRA 14
Funding Your IRA 14
2. Checklist: Designating your beneficiary for your IRA 15
3. 2023 Limits for IRAs & Employer Plans 17
IRA and Salary Deferral Contribution limits if you are under age 50 as at year-end 2023 18
IRA and Salary Deferral Catch-up contribution if you are at least age 50 as at year-end 2023 18
2023 MAGI limits for deducting regular contributions to Traditional IRAs 19
2023 MAGI limits for making a regular contribution to a Roth IRA 20
2023 AGI limits for eligibility for saver’s credit: salary deferral and IRA/Roth IRA contributions 20
4. Traditional IRA Features and Benefits: Quick Reference Guide 21
5. Traditional IRA Funding Options: Quick Reference Guide 24
Regular Traditional IRA Contribution 24
Spousal Traditional IRA Contributions 25
Recharacterization of Contribution Made to Roth IRA 27
Deemed Traditional IRA Contribution 27
Payroll Deduction IRA 28
Employer-Sponsored IRA 28
Rollover from qualified plans [401(a) and 403(a)], 403(b) and governmental 457(b) plans [Not a Designated Roth Account (DRA)] 28
6. Traditional IRA Deductibility: Quick Reference Guide 31
Eligibility to deduct regular Traditional IRA Contribution 31
Determination of “Who Is an Active participant” in an Employer Sponsored Plan 33
7. Roth IRA Features and Benefits: Quick Reference Guide 35
8. Roth IRA Funding Options: Quick Reference Guide 37
Regular Roth IRA Contribution 37
Spousal Roth IRA Contributions 39
Recharacterization of Contribution Made to Traditional IRA 39
Deemed Roth IRA Contribution 40
Payroll Deduction IRA 40
Employer-Sponsored IRA 40
Conversion from Traditional IRA, SEP IRA and SIMPLE IRA 41
Retirement plan rollovers from qualified plans [401(a) and 403(a)], 403(b) and governmental 457(b) plans [non-Roth] 42
Designated Roth Accounts (DRA) [Roth 401(k), Roth 403(b) and Roth Governmental 457(b)] Rollovers 44
Military Death Gratuities and Service Members’ Group Life Insurance (SGLI) Payments 45
9. Roth IRA vs. Traditional IRA: Quick Reference Guide 46
Regular IRA Contribution Limits 46
Contribution eligibility 46
Deadline| Regular IRA Contribution 47
Eligibility to deduct contributions 47
Age Limitation 49
Saver’s Credit 49
Treatment of earnings 49
Distributions | Optional Vs. Required 50
10. Saver’s Credit: Quick Reference Guide 51
Eligibility Requirements 51
Eligible Contributions 51
Credit Amount 52
Reduction of Eligible Contributions 53
11. Checklist for Your Regular Traditional and Roth IRA Contribution 54
12. The Transfer/Rollover Lingo: Recommend when communicating with financial institutions and plan trustees 57
13. Rollover and Transfer Permissibility: Quick Reference Guide 60
Summary of rollover/transfer permitted between different type of accounts 61
Rollover and Transfer Limitations for IRAs and Employer Sponsored Plans: Quick Reference 63
14. Rollover and Transfer Rules for Nonspouse Beneficiaries: Quick Reference 69
15. Early Distribution Penalty Exceptions: Quick Reference Guide 72
Exceptions to the 10% Early Distribution Penalty ‘by Type of Account’ 72
16. Quick Reference: Substantially Equally Periodic Payments/SEPP/72(t): Quick reference Guide 75
SEPP Guidance 79
17. Roth IRA Distribution: Tax and Penalty Treatment: Quick Reference 82
Quick Reference # 1: Amounts Subject Income Tax and/or the 10% Penalty 82
18. Tax and Penalty Determination on Nonqualified Distribution from a Roth IRAs: Quick Reference 85
19. Required Minimum Distributions 87
Accounts Subject to RMDs 87
RMD Start Dates for Various Birthdates and Ages 87
RMD Deadlines for Account Owners 88
RMDs and Portability: Summary 90
RMD Aggregation Rules 91
RMD Related Definitions 93
IRA RMD Calculation Formula 95
Uniform Lifetime Table: Effective 2022 and After 96
20. IRA Beneficiary Distribution Options: When the IRA Owner Died on or before December 31, 2019 97
Traditional IRA Beneficiary Distribution Options 97
When the IRA Owner Dies before the Required Beginning Date (RBD) 98
When the IRA Owner Died on or after the Required Beginning Date (RBD) 99
Roth IRAs: Beneficiary Distribution Options 100
21. IRA Beneficiary Distribution Options: When the IRA Owner Dies After December 31, 2019 101
New 10-Year Rule for Designated Beneficiaries 101
10-Year Rule for eligible Designated Beneficiaries 102
When the IRA owner Dies before 2020 and the beneficiary dies after 2019 102
IRA Beneficiary Options: under the SECURE Act 102
Beneficiary is an Eligible Designated Beneficiary: Spouse. The options are: - 102
If the IRA owner died before the RBD, the options are 102
If the IRA owner died on/after the RBD, the options are (N/A For Roth IRA) 102
A. Own account: Treat as own IRA or rollover to own IRA/other eligible retirement account 102
A. Own account: Treat as own IRA or rollover to own IRA/other eligible retirement account 102
Please note: Taking a distribution of the entire IRA balance at any time is always an option. 103
Beneficiary is an Eligible Designated Beneficiary: Nonspouse. The options are: 104
If the IRA owner died before the RBD, the options are 104
If the IRA owner died on/after the RBD, the options are (N/A For Roth IRA) 104
A. Beneficiary IRA: Life expectancy rule Distributions over the beneficiary’s nonrecalculated life expectancy, beginning 12/31 of the year that follows the year in which the IRA owner died. 104
If beneficiary is a minor child of the IRA owner, then the inherited IRA must be fully distributed by the end of the 10th year after the year in which the child reaches age 21 or dies, whichever is earlier. 104
If beneficiary is a minor child of the IRA owner, then the inherited IRA must be fully distributed by the end of the 10th year after the year in which the child reaches age 21 or dies, whichever is earlier 104
B. Beneficiary IRA: Simple 10-year rule 104
Please note: Taking a distribution of the entire IRA balance at any time is always an option. 104
Beneficiary is a Designated Beneficiary who is not an Eligible Designated Beneficiary. The options are: - 105
If the IRA owner died before the RBD, the options are 105
If the IRA owner died on/after the RBD, the options are (N/A For Roth IRA) 105
Beneficiary IRA: Simple 10-year rule 105
Beneficiary IRA: Simple 5-year rule. 105
Successor Beneficiary Options 106
Notes for Quick Reference Guides for Beneficiary Distributions 108
22. Qualified Charitable Distributions 111
General Rules and Requirements for Qualified Charitable Distributions 111
QCD and RMDs 113
QCDs and Basis Amounts 115
QCDs and Deductible Traditional IRA Contributions: No Double Dipping for Tax-Free 117
23. Tax Reporting Forms and Requirements for IRAs 119
IRS Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., 119
IRS Form 5498, IRA Contribution Information 120
IRS Form 990-T, Exempt Organization Business Income Tax Return 120
IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding 120
Form W-8CE, Notice of Expatriation and Waiver of Treaty Benefits 121
IRS Form 8606, Nondeductible IRAs 121
IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 122
IRS Form 8880, Credit for Qualified Retirement Savings Contributions 122
Appendix A. Life Expectancy Tables: Effective 2022 and After A
Single Life Expectancy-For Use by Beneficiaries: Effective for 2022 and after A
Uniform Lifetime Table: For use by Unmarried Owners, Married Owners Whose Spouses Are Not More Than 10 Years Younger, and Married Owners Whose Spouses Are Not the Sole Beneficiaries of Their IRAs): Effective for 2022 and after D
Appendix B: IRS’ Guide to Distribution Codes for IRS Form 1099-R, as provided to IRA Custodians/Trustees by the IRS. E
Table 1. Guide to Distribution Codes E
Appendix C: Transactions Reported on IRS Forms 1099-R and 5498 K
Recommended IRA Resources L
SIMPLE, SEP, and SARSEP Answer Book M
Roth IRA Answer Book M