Appleby

Your comments ( copied and pasted) are in black My responses in blue 1) since it is a long way before I will be 59 & 1/2 yo, all contributions will be considered "non-qualified" -- except under the stipulated exemptions? Right…. a qualified distribution must occur at least five years after the Roth IRA owner established and funded his/her first Roth IRA and at least one of the following requirements must be met: - you must be at least age 59 ½ when the distribution occurs - you use the distribution towards the purchase or rebuilding of a first home - the distribution occurs after you become disabled -the assets are distributed to the your beneficiary after your death. 2)Is the $2,000 (regular Roth) contributed in 1998 tax free, since it is principal? Is it subject to 10% additional tax penalty? A distribution of regular IRA participant contributions is always tax and penalty free. (3) Is the remaining $8,000 (Roth conversion from traditional IRA) contributed in 1999 tax free, since it is principal? [Note that during the 1999 conversion tax, the said $8,000 was already taxed as regular acccount.] . Yes, because you already paid taxes on this amount. It will , however be subjected to the 10 percent early withdrawal penalty, unless you meet an exception (4) If I understood you correctly, is the remaining $8,000 (Roth conversion from traditional IRA contributed in 1999) contributed in 1999) subject to 10% additional tax penalty? Yes (5) When it stipulates "10% additional tax (penalty)" for early distributions made within 5 years of the Roth conversions, does this mean that I owe penalty taxes of $800 (for the $8000)? Yes And, possibly $200 (for the $2000 Roth contribution in 1998)? No (6)Or, do you declare the 10% "early withdrawal" penalty as income, to be taxed? No . This is not income, merely a penalty on an early withdrawal.

Under EGTRRA, an employee may make an IRA contribution to a qualified plan, if the plan allows. These contributions are referred to as “deemed IRA” contributions. . This is effective for ax years beginning 2003. A SEP IRA can be rolled to a qualified plan ( including a 401(k) plan), effective for tax years beginning 2002. Amounts representing non-deductible IRA contributions and required minimum distributions must not be included in the rollover.

cornelio, You say your total contribution is $15,000. However, as you were limited to $2,000 each year to 2001, this cannot be from just regular contribution. Did you convert assets from a traditional IRA to your Roth IRA? If so, what year did the conversion occur? If you converted assets from your traditional IRA anytime after 1998, you may owe a 10 percent penalty of the converted assets, if they are distributed before five years after the conversion. You have no earnings… because your balance is less than your contributions.

My apologies. The correct URL is http://www.benefitslink.com/boards/index.p...ST&f=18&t=19127

1. The fifth year is 2003 2. A “qualified distribution” cannot b take before 2003. Your first qualified distribution could be take January 1,2003 3. You may withdraw IRA participant contributions anytime (even the day after you make the contribution), without tax and penalty. 4. You would early distribution penalty only if you had earnings on the IRA contributions you deposited. You would pay tax only if the distribution was not qualified and your distribution included earnings. The taxes would be due on the earnings. See post at the following URL for additional information http://benefitslink.com/boards/index.php?showtopic=19127

The plan may reduce the number of hours to an amount less than 1000, . The 1000 hours is a maximum (cap) refer DOL Regs. §2530.202-2(a),

Mary Kay, The IRA Custodian is responsible for filing the Form 990-T. The Custodian is also responsible for debiting the IRA for UBTI and remitting it to the IRS on behalf of the IRA holder. For qualified plans it is different. The plan administrator is responsible for handling the process.

It depends.. See post at the follwing URL http://www.benefitslink.com/boards/index.p...ST&f=18&t=19127

Not familiar with what you wrote mbozek… but for retirement accounts, UBTI is income from unrelated trade or business, for instance Limited Partnerships in which the IRA invests. Form 990-T is filed when the UBI is $1,000 or more. Generally, this means that the retirement account holder is required to pay taxes on the UBI ( unlike other retirement income which is tax deferred or tax-free). The retirement account custodian is required to file the 990-T , withhold any taxes due on the UBI and pay such taxes to the IRS on behalf of the retirement account.

Yes. California is a conforming state- see the URL below http://www.americanbenefitscouncil.org/doc...update72602.pdf

Yes. California is a conforming state- see the URL below http://www.americanbenefitscouncil.org/doc...update72602.pdf

IRA, Roth IRA contributions are not reported on your income tax return. However, you should keep a record of your contributions and other Roth IRA transactions so that you can properly account for the Roth IRA balance. This will prove to be invaluable , should you make a Roth conversion or chose to take a distributions from your Roth IRA that does not meet certain requirements For information on Roth IRA distributions see the post at the following URL http://benefitslink.com/boards/index.php?a...ST&f=18&t=19127

Nicola, To support your interpretation, you may cite [iRS Notice 98-4, 1998-2 IRB 26, Q&A D-4]

Here’s another http://benefitslink.com/boards/index.php?a...minate+a+simple

See Gary’s response to these two posts (just click on the links) http://benefitslink.com/boards/index.php?a...31&hl=terminate http://benefitslink.com/boards/index.php?a...=ST&f=2&t=19292

Bear in mind also that if you maintain a qualified plan concurrently with a SEP plan, you must use a prototype SEP document. You may not use the 5305-SEP when you maintain another plan.

For purposes of a SIMPLE IRA, compensation is defined as the amount reported on the participant's W-2. Therefore, compensation for the year, that was paid prior to the effective date must be considered. [see IRS Notice 98-4, 1998-2 IRB 26, Q&A D-4]

Au contraire Mike Revenue Ruling 2002-62 states “The interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate (determined in accordance with § 1274(d) for either of the two months immediately preceding the month in which the distribution begins)”. Using the RMD tables will not produce a higher amount than amortization annuitization. Remember the basis of Revenue Ruling 2002-62 was to allow retirement account owners to switch to the RMD method so that the mount would be less. Getting divorced may mean giving up at least half of the assets. DDDlump, an alternative is to ask the IRS permission to use a higher rate. Of course, this will cost. PLRs costs at least $600.

Roth IRAs are offered by most ( if not all) banks, brokerages houses, mutual fund companies etc. You may start by checking your yellow pages under financial institutions or a similar category. As you contact each financial institution, make note of the features of their specific Roth IRA products. Before you buy, the following are just a few things you should compare: Fees Rate of return if the investment will be fixed The investment options Good luck.

Here’s a very good illustration Check middle of the page http://www.investopedia.com/university/ret...ns/ira/ira2.asp

Here’s another case ( from plansponsor.com) The details are available at the following URL ( registration required) http://www.plansponsor.com/pi_type10/?RECORD_ID=20090

Mark, It depends on your reason for the withdrawal. If your distribution is a “Qualified distribution” , the withdrawn amount will be tax and penalty free. If the distribution does not meet the requirements to be a qualified distribution, then the following rules apply. You did not mention any Roth IRA contributions, so I will assume you made none. My response is based on the assumption that your Roth IRA balance consists of two Roth IRA conversions and possibly earnings. -If the amount you withdraw is equal to or less than the value of your 1998 Roth conversion, the withdrawal will be tax and penalty free. -If the amount you withdraw is more than the value of your 1998 Roth conversion, but not more than your 1998 and recent conversion combined, the amount equal to the value of your 1998 conversion is tax and penalty free ( because it has been at least five years since these assets were converted). The balance will be considered from your recent Roth conversion and will be subjected to 10 percent early withdrawal penalty ( because it has not been at least five years since these assets were converted). , unless you qualify for an exception* If the amount you withdraw is more than your 1998 and recent Roth conversion combined the amount equal to the value of your 1998 conversion is tax and penalty free.; The amount equal to your recent Roth conversion will be subjected to a 10 percent early withdrawal penalty, unless you qualify for an exception. The amount in excess of your 1998 and recent conversion combined will be subjected to ordinary taxes and 10 percent early withdrawal penalty, unless you qualify for an exception * The exceptions are : You are least age 59 ½ when the distribution occurs You use the distribution towards the purchase or rebuilding of a first home for himself or a qualified family member. You withdraw the amount after being disabled Your beneficiary receives the assets after your death. You use the assets for medical expenses for which you were not reimbursed. Your distribution is part of a SEPP program. You use the assets for higher-education expenses. You use the assets to pay for medical insurance after you lose your job. You assets are distributed as a result of an IRS levy.

The list of IRS approved nonbank trustees and custodians is provided in Announcement 2002-12, which is available at the URL below. Generally, speaking, financial institutions include banks and institutions in Ann 2002-12 http://www.irs.gov/pub/irs-irbs/irb02-08.pdf

For a Roth IRA distribution, withdrawn for the purpose of a fist-time home purchase, you have 120 days to rollover( put back) the amount withdrawn, if the funds are not used to purchase the home. Otherwise, you have sixty days to rollover the funds.

The participant may make an IRA contribution, providing he/she has eligible compensation. A SIMPLE IRA is treated as an employer for the purpose of determining deductibility. The participant will be considered “active” for the years the contribution is attributable to, for instance, if the employer makes a non-elective contribution for 2002 in 2003, the participant is “active for 2002 Check out the following article for more information Traditional IRA Deductibility Limits