IRA Certified IRA Services Professional 5

Question 1

What is a prohibited transaction in the context of IRAs, and what is the primary consequence?

Accepted Answer

A self-dealing transaction between the IRA and a disqualified person; the IRA loses its tax-exempt status

Answer

A prohibited transaction under IRC 4975 involves self-dealing between the IRA and a disqualified person, which disqualifies the IRA and treats all assets as distributed on the first day of the year.

Question 2

Who is considered a 'disqualified person' for IRA prohibited transaction purposes?

Accepted Answer

The IRA owner, their spouse, lineal descendants and ancestors, and fiduciaries

Answer

Disqualified persons include the IRA owner, their spouse, ancestors, lineal descendants and their spouses, fiduciaries, and certain service providers.

Question 3

Under SECURE 2.0, what new provision allows employers to make matching contributions to an employee's Roth IRA or designated Roth account?

Accepted Answer

Optional Roth employer matching

Answer

SECURE 2.0 allows employers to offer employees the option to receive employer matching contributions as Roth (after-tax) rather than pre-tax contributions.

Question 4

An IRA owner fails to take their full RMD by December 31. What is the excise tax rate on the shortfall under SECURE 2.0?

Accepted Answer

25%, reducible to 10% if corrected timely

Answer

SECURE 2.0 reduced the RMD excise tax from 50% to 25%, further reducible to 10% if the missed RMD is corrected within the correction window.

Question 5

What is the primary purpose of IRS Form 5498?

Accepted Answer

To report IRA contributions, rollovers, RMD information, and fair market value to the IRS

Answer

Form 5498 is filed by the IRA custodian to report contributions, rollovers, conversions, RMD requirements, and the December 31 fair market value of the account.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA Certified IRA Services Professional 5