AFTR Retirement Accounts and Tax Treatment 1 — Questions and Answers
Question 1: What is the 2024 contribution limit for a traditional IRA for taxpayers under age 50?
- $6,000
- $6,500
- $7,000 (Correct answer)
- $7,500
Correct answer: $7,000
For 2024, the IRA contribution limit increased to $7,000 for taxpayers under age 50.
Question 2: At what age must required minimum distributions (RMDs) generally begin under SECURE 2.0 Act provisions effective in 2023?
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
SECURE 2.0 raised the RMD starting age to 73 for individuals who reach age 72 after December 31, 2022.
Question 3: Which of the following retirement account types allows qualified withdrawals to be completely tax-free?
- Traditional IRA
- SEP-IRA
- Roth IRA (Correct answer)
- SIMPLE IRA
Correct answer: Roth IRA
Roth IRA qualified distributions are tax-free because contributions are made with after-tax dollars.
Question 4: What penalty applies to early distributions from a traditional IRA taken before age 59½, absent a qualifying exception?
- 5%
- 10% (Correct answer)
- 15%
- 20%
Correct answer: 10%
A 10% early withdrawal penalty applies to taxable distributions from traditional IRAs before age 59½ unless an exception applies.
Question 5: A taxpayer who is an active participant in an employer retirement plan with AGI above the phase-out range may:
- Deduct the full traditional IRA contribution
- Not contribute to any IRA
- Contribute to a traditional IRA but lose the deduction (Correct answer)
- Only contribute to a Roth IRA
Correct answer: Contribute to a traditional IRA but lose the deduction
Active participants above the phase-out range can still contribute to a traditional IRA but cannot deduct the contribution, resulting in a nondeductible contribution.
Question 6: Which form must a taxpayer file to report nondeductible IRA contributions and track the IRA basis?
- Form 5498
- Form 8606 (Correct answer)
- Form 1099-R
- Schedule D
Correct answer: Form 8606
Form 8606 is used to report nondeductible IRA contributions and to calculate the taxable portion of IRA distributions when basis exists.
Question 7: What is the catch-up contribution amount allowed for traditional or Roth IRA contributions for taxpayers age 50 and older in 2024?
- $500
- $1,000 (Correct answer)
- $1,500
- $3,000
Correct answer: $1,000
Taxpayers age 50 and older can contribute an additional $1,000 catch-up amount, bringing the 2024 IRA limit to $8,000.
AFTR Retirement Accounts and Tax Treatment 1
What is the 2024 contribution limit for a traditional IRA for taxpayers under age 50?