Appleby

See the instructions for line 15 of IRS Form 1040 http://www.irs.gov/pub/irs-pdf/i1040.pdf

If the individual is not a NRA (i.e. is a US citizen or resident alien), then the withholding rules under Sec 3405 is applies, i.e. if the amount is rollover eligible, then the payor must withhold 20%, unless the amount is being rolled to an eligible retirement plan. If the amount is not rollover eligible, then you must withhold 10 percent. This 10 percent withholding cannot be waived if the individual does not provide a correct TIN. It appears that even if the individual is an NRA a TIN is still required, albeit not before the distribution occurs. If the TIN is not provided, 30% must be withheld, regardless of the treaty rate… also the distribution can be accommodated without the TIN, providing the payee provides some assurance that the Tin is applied for and will be provided when issued . For NRAs who are not eligible to receive a SSN, they may apply for an ITIN There are certain procedures that the payor must follow when it is discovered that the TIN is missing or invalid. See publication 1586

I agree. For a summary of how the Roth and the traditional IRA stack-up against each other, see http://www.investopedia.com/articles/retir...t/03/012203.asp

The rule that applies if your income is between $150-$160K (the phase-out rule) is explained in this tutorial http://www.investopedia.com/university/ret...ra/rothira1.asp

Lame Duck- we posted almost simultaneously. I think you meant to say may preclude a deduction instead of “will preclude a traditional IRA contribution“ right?

You can establish a Roth IRA (one for each spouse) and each spouse may contribute $3,000 ( $3,500 if at least age 50 by year-end) You can establish and contribute to a traditional IRA (one for each spouse), but you may not be able to deduct the contribution. See http://www.investopedia.com/articles/retir...t/03/011603.asp

For SEP IRAs, you are considered an active participant for the (your) taxable year that the contribution is deposited to your SEP IRA. Therefore, if the employer deposits your SEP contribution for 2003 during 2004, you are not considered active for 2003. Consequently, the contribution would affect your ability to deduct your 2004 IRA contribution…and the company would not be required to issue a corrected W-2. This rule applies to plans for which contributions are discretionary

Nirvana, I am not sure why you think a correction would be required. The employer SEP contribution does not affect the amount you contribute to your IRA. The amount your employer contributes can be 100% of your compensation up to $40,000 for 2003. In addition to your SEP contribution, you may deposit/contribute your $3,000 to your IRA. Please post any follow-up questions

You're are right. Typographical error . Good looking out

Agreed. The employer could choose to waive that requirement, thereby allowing individuals who earn less than $450(indexed), to be eligible, providing they meet all other eligibility requirements. .

… no, they would not need to wait until 01/01/05 to establish the 401(k) plan. It can be established for 2004. Yes, you are correct. SARSEPs can now be rolled over to qualified plans. Amounts subject to the ADP test should not be rolled over until those amounts have passed the ADP testing. Note: For SARSEPs, one should be aware of the exclusion limit under I.R.C. § 402(h),

Mike, I am sure you know, but just to clarify for anyone who may not… for SEP purposes, a year of service in a SEP IRA is any period, however short. Therefore, an individual who works even only for a few days in the year is considered to have accrued one year of service [read: "perfomed service during that year (regardless of whether they are paid or not" -- gsl], whether the service was performed on a full time or part time basis.

Also, see the definition of Net earnings from self-employment in Pub 560 at http://www.irs.gov/pub/irs-pdf/p560.pdf (page 5). If he has Net earnings from self-employment, then he is eligible to establish a plan based on those earnings. …and I agree that whether he has an EIN is not a determining factor. Although the IRS recommends that an EIN is used for business purposes ( to distinguish between the business and the individual ) , many Sole proprietors use their SS# instead of an EIN.

mbozek, you raise an important issue. We constantly receive numerous QDROs for IRAs. As recent as today, we receive a very threatening letter from a lawyer, demanding that we (the IRA custodian) provide a sample QDRO to his client or indicate whether the sample the lawyer provided meet our requirements. The letter and the sample QDRO made several references to IRC Sec. 414(p), the plan under IRC 401(a), the IRA custodian and yet referred to the account in question as the “IRA”.

Yes. The life expectancy option was available then (assuming it was allowed by the plan, as plans are not mandated to follow the provision of 401(a)(9)). I agree with Pensions in Paradise. Since the participant died before the required beginning date, the options available to the non-spouse beneficiary are: 1. Begin life expectancy distribution by 12/31 o the year following the year the participant died or 2. The five-year rule (assets must be fully distributed by 12/31 of the 5th year following the year of death). The life-expectancy option is the default option. However, should the beneficiary fail to begin life-expectancy distributions by 12/31 of the year following the year the participant died, then the beneficiary must use the five year option. The assets are not required to be distributed in a lump-sum, providing the total balance is distributed by the end of the 5th year. Lump sum is always an option. For your particular example, the beneficiaries are subject to the five-year rule.

Yes. In fact, many IRA owners make their contributions “bit by bit”. The limit for 2004 is $3,000 ($3,500 is you are at least age 52 by 12/31/2004)

Hear hear!! …and in the process, Dave has somehow managed to attract the best of the best to the site, including those who write books on retirement plans, those who issue documents that serve as guidance , some of best attorneys , PAs, consultants and so on… Big-up Dave!!

I agree. Assets from a qualified plan, including 401(k) plans, must first be rolled to a traditional IRA before the assets can be converted to a Roth IRA. The conversion occurs between the traditional IRA and the Roth IRA. If you distribute assets from your Roth IRA to be used towards the purchase, building, rebuilding of the first home of a qualifying individual, the penalty is waived. See the following URLs for other discussions on the taxation of Roth IRA distributions http://benefitslink.com/boards/index.php?showtopic=19386 http://benefitslink.com/boards/index.php?showtopic=21918 http://benefitslink.com/boards/index.php?showtopic=22114

I see your point RobO…but an argument could be made for the other POV, which is, the rollover is allowed, providing the assets are maintained in a separate account-, from which the 72(t) is continue and not commingled with any other assets. I base my reasoning on the following: 1. A traditional IRA that is part of a 72(t) program can be converted to a Roth IRA. The 72(t) payments must continue from the Roth IRA. This is not considered a modification, even though it is defined as a distribution and rollover. 2. Generally, a 72(t) distribution can occur from a qualified plan only after the participant has separated from service. However, the IRS recently issued guidance providing that rollover assets are not subject to the timing requirements for distribution purposes of non-rollover plan assets. ( see Rev. Rul. 2004-12) What do you think? Note: In spite of my explanation above, I am not convinced that it can or cannot be done.

I agree. You can also read about it at http://www.investopedia.com/articles/retir...t/04/031704.asp

If you later find that you are not eligible for the Roth IRA contribution, you may correct by doing either of the following: ----Removing it as a “return of excess contribution”. This means you no longer have a contribution for the year ----Recharacterizing it to a traditional IRA contribution. You still have the contribution, just to a different type of IRA As John said, the IRA custodian will have their forms and procedures for doing either.

You may also try the calculator at www.72t.net Click on “minimum distributions”

No. It does not. You are eligible to make your regular IRA contribution providing you have eligible compensation . See page 8 of IRS publication 590 available at http://www.irs.gov/pub/irs-pdf/p590.pdf

Can attach only one file per post Private_Letter_Ruling_8439066.pdf

That reminds me: the PLRs attached Private_Letter_Ruling_8527083.pdf