IRA Certified IRA Services Professional 3

Question 1

A SEP-IRA employer contribution for a self-employed individual is limited to what percentage of net self-employment income (after the deduction)?

Accepted Answer

20%

Answer

Self-employed individuals can contribute up to 20% of net self-employment income (which equals 25% of compensation after the SE deduction adjustment).

Question 2

Which IRA type requires the employer to match employee contributions dollar-for-dollar up to 3% of compensation, or make a 2% non-elective contribution?

Accepted Answer

SIMPLE IRA

Answer

SIMPLE IRA rules require the employer to either match contributions up to 3% of compensation or contribute 2% non-electively for all eligible employees.

Question 3

What happens if an excess IRA contribution is not corrected by the tax-filing deadline (including extensions)?

Accepted Answer

A 6% excise tax applies each year the excess remains

Answer

Uncorrected excess contributions are subject to a 6% excise tax annually until the excess is removed or absorbed by a future year's contribution room.

Question 4

Under SECURE 2.0, which new rule allows Roth treatment inside SIMPLE and SEP-IRAs?

Accepted Answer

Optional Roth elective deferrals for SIMPLE IRAs and Roth SEP contributions

Answer

SECURE 2.0 allows SIMPLE IRAs to offer Roth elective deferrals and SEP-IRAs to accept Roth contributions, effective 2023.

Question 5

An IRA owner designates a trust as beneficiary. What must the trust satisfy to allow 'look-through' treatment for distribution purposes?

Accepted Answer

The trust must be irrevocable, have identifiable beneficiaries, and provide a copy to the custodian by October 31 of the year after death

Answer

For look-through treatment, the trust must be valid, irrevocable at death, have identifiable beneficiaries, and documentation must be provided to the custodian by October 31 of the year following the IRA owner's death.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA Certified IRA Services Professional 3