IRA Owner Tax Forms and You

Learning Objectives

Determine which tax forms an IRA owner must complete when certain IRA activity occursUnderstand which IRS penalty taxes may apply to IRA owners

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Nontaxable Traditional IRA Distributions

One-per-12-month rule60-day rule

IRA-to-IRA Rollover

IRA IRA

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Qualified Charitable Distribution

IRA

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HSA Funding Distribution

HSA

IRA

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IRA-to-IRA Rollover Example

Jesse, age 61, received a $28,000 distribution (he waived withholding) from his Traditional IRA on June 15, 2017.He deposited $28,000 into his Traditional IRA as a rollover on July 16, 2017.

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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.

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HSA Funding Distribution Example

Document the qualified HSA funding distribution on Form 1040

Must remain HSA eligible for subsequent 12 months

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HSA Funding Distribution Example

Financial organization reports the contribution on Form 5498-SA in Cooper’s name and SSN

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10% Early Distribution Penalty Tax

10% < 59½

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Form 1040 Line 59 Instructions

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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.

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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

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NO

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Early Distributions Not Subject to 10% Early Distribution Penalty Tax

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Higher education expenses

First-time homebuyer expenses

Medical expenses

Health insurance premiums following unemployment

Qualified reservist distributions

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.

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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 distributionDo not add a 10% penalty tax to line 59 of IRS Form 1040

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2017 Form 5329 Instructions section

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Traditional IRA 50% Excess Accumulation Penalty Tax

RMD = 50%penalty

Financial organization missed distribution

IRA owner forgot distribution

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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.

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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

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(RC 2,381.00)

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Traditional IRA Deductible Contribution

Traditional IRA Deduction Example

Lulu and Jefferson file joint tax returnMAGI = $87,600 Each contributed $5,500 for 2017Both eligible for full deductions

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Traditional IRA Nondeductible Contribution

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

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Traditional IRA Nondeductible Contribution Example

Must file IRS Form 8606 to report the nondeductible Traditional IRA contribution

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Withdrawing Traditional IRA Nondeductible Contributions

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 2016

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Withdrawing Traditional IRA Nondeductible Contributions Example

Complete Form 8606 to document the distribution of nondeductible assetsComplete Form 1040, line 15a

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Roth IRA Distribution

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 2016

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Roth IRA Distribution Example

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

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IRA Owner Tax Forms Exercise

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IRA Owner Tax Forms Exercise Answers1. Form 10402. Form 5329 and Form 10403. Form 10404. Form 8606 and Form 10405. Form 10406. Form 5329 and Form 10407. Form 8606 and Form 1040

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Questions?

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IRA Owner Tax Forms and You

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