AFTR Retirement Accounts and Tax Treatment 3

Question 1

An inherited IRA received by a non-spouse beneficiary who is not an Eligible Designated Beneficiary (EDB) must generally be fully distributed within:

Accepted Answer

10 years

Answer

Under the SECURE Act, non-EDB beneficiaries must distribute the entire inherited IRA within 10 years of the original owner's death.

Question 2

A self-employed individual's net self-employment income is $100,000. What is the maximum SEP-IRA contribution they can make (before the SE tax deduction adjustment)?

Accepted Answer

$20,000

Answer

After adjusting for the deductible half of self-employment tax, the effective SEP contribution rate for self-employed individuals is approximately 20% of net self-employment income, yielding roughly $20,000 on $100,000 of net income.

Question 3

Which of the following correctly describes a backdoor Roth IRA strategy?

Accepted Answer

Making a nondeductible traditional IRA contribution and then converting it to a Roth IRA

Answer

A backdoor Roth involves making a nondeductible traditional IRA contribution and then converting those funds to a Roth IRA, allowing high-income taxpayers to fund a Roth despite income limits.

Question 4

Form 1099-R is used to report which of the following?

Accepted Answer

Distributions from pensions, annuities, IRAs, and retirement plans

Answer

Form 1099-R is issued by payers to report distributions from retirement accounts including IRAs, pensions, annuities, and profit-sharing plans.

Question 5

A taxpayer age 55 who separates from service from their employer can take penalty-free distributions from which type of retirement account?

Accepted Answer

Employer-sponsored 401(k) plan

Answer

The 'Rule of 55' allows penalty-free distributions from a 401(k) or similar employer plan if the taxpayer separates from service in or after the year they turn 55; this exception does not apply to IRAs.

AFTR - Annual Federal Tax Refresher Practice Test

AFTR - Annual Federal Tax Refresher Practice Test

AFTR Retirement Accounts and Tax Treatment 3