ira Flashcards
ira (25 cards)
Active Participant
Someone who is participating in an Eligible Retirement Plan (ERP)
ERP
401k plan or SEP (Simplified Employee Pension) IRA
SEP IRA
An individual retirement account associated with your employer’s SEP Plan.
Beneficiary
The individual or other entity entitled to receive the assets upon the IRA owner’s death
COLA (Cost-Of-Living Adjustment)
The tax law places limits on the dollar amount of contributions to retirement plans and IRAs and the amount of benefits under a pension law. Limits are required to be adjusted annually for cost-of-living increases.
Contribution
When new funds are deposited into an IRA
Conversion
A taxable movement of assets from a Traditional IRA to a Roth IRA
Transfer
Occurs when an IRA owner directs the movement of his/her IRA assets to an IRA of the same type, directly from one custodian/trustee to another custodian/trustee without having direct control or custody of the assets.
Rollover
Occurs when an IRA owner takes a distribution and subsequently redeposits into an IRA within 60 calendar days. This can only be done once every 365 days.
Custodian
A financial institution that holds the funds and pays dividends and does not invest the money.
Grow is the Custodian. As the custodians, we must do two things:
1. We hold the assets (in a share or certificate)
2. Report, withhold, and provide up to date information (to both our member and the IRS)
Deductibility Contribution
An IRA deductibility contribution is limited to Traditional IRAs. The current tax year advantage of not paying income taxes translates to taxable distributions in later years. A competent tax advisor should be consulted for more information or options for this type of contribution
Excess Contribution
An ineligible IRA contribution, generally the result of contributing more than the maximum contribution limit.
Fair Market Value (FMV)
The value of an IRA on December 31st of every year. Members could receive multiple FMV amounts, as it is the total held with a specific institution as of December 31st.
Federal Withholding
Some IRA distributions are subject to a federal income tax withholding. The default withholding rate is 10%, however members can choose for us to withhold any whole number between 0 and 100%. To know how much they need to withhold, they can consult with a competent tax advisor.
Internal Revenue Service
An U.S. agency charged with regulating and collecting nearly all federal taxes, including personal and corporate income taxes, social security taxes and excise and gift taxes. (excise taxes are taxes that are imposed on various goods, services and activities).
Life Expectancy Tables
These are a set of tables issued by the IRS that provides divisors used in determining Required Minimum Distributions for IRA owners who have reached the RMD age, and to their beneficiaries after the IRA owners’ deaths.
Modified Adjusted Gross Income (MAGI)
The adjusted gross income (AGI) on a federal income tax return without considering deductions for an IRA contribution, student loan interest, tuition, and fees.
Nondeductible Contribution
These include all contributions to a Roth IRA and contributions to a Traditional IRA that an individual is not eligible to deduct or chooses not to deduct.
Normal Distribution
A distribution taken on or after an IRA owner reaches age 59 1/2. The 10 percent premature distribution penalty tax does not apply.
Premature or early distribution
A distribution taken before an IRA owner reaches age 59 1/2. The premature distribution penalty is not the same as Federal Withholding.
Recharachterization
The process of reversing a conversion of a Traditional IRA to a Roth IRA, or the reversal of a regular contribution to a Traditional IRA to be a Roth IRA contribution or vice versa.
Regular Contribution
A common name for a Traditional IRA to be a Roth IRA owner’s annual contribution.
Required Beginning Date (RBD)
April 1st following the year an IRA owner reaches the age determined by the IRS, to begin making required minimum distributions.
Rolldback Period
The time between January 1st and April 15th (or the Tax Day for that year).
