Appleby

MVICK, This IRS issued document explains how to determine how much you should recharacterize ( the amount will represent the $2000 contribution, even though it will be less than $2,000) It's quite simple- show it to your CPA. When you give the current custodian instructions to rechacterize, the amount you provide should take into account the loss.

Barry and Fran , Sorry for the delayed response- It seems you are right!!!- I concede Appleby

fran krawiec, I agree with you- but I think we are mixing concepts here. Your explanation is for a participant who sets up separate IRAs and name separate beneficiaries for each IRA. In your example, the spouse would be the sole beneficiary of the IRA in question and must use recalculation. The discussion I responded to is based on one IRA, with multiple primary beneficiaries, one of which is a spouse. The regs are very clear on this. For an IRA with multiple beneficiaries, the spouse must use the rules that apply to a non-spouse beneficiary

If the spouse is the sole beneficiary and elects not to treat the IRA as his/her own, then the spouse must use his/her single life expectancy on a recalculated basis. The option to recalculate is only available if the spouse is the sole primary beneficiary. Seperating the assets into seperate beneficiary accounts does not make the spouse the sole beneficairy, but only allows him/her to use his/her own life expectancy. For IRAs with multiple beneficiaries, even if accounts are seperated by the deadline, the spouse must use the nonrecalculation method. I hope this makes sense.

There is no minimum age - they should just be careful about child labor laws... For example, if the parents have an advertising business, a newborn baby could be employed to advertise products. The compensation, paid to the baby, could be used to make a contribution to an IRA.

Barry you are right. If the participant died in 2000, the new rules DO apply to the beneficiary, as they have until 12/31/2001 to takes the necessary steps that will determine their post death distributions. For example, Assume that participant is over 70 ½ and died 2000. Assume also that there are multiple beneficiaries on the IRA. If the assets were separated into individual inherited accounts for the beneficiaries by December 31,2001, they would each be allowed to use their own life expectancies. The disclaim and cash out rules also applies in this case. The only unclear issue, is if the participant died 1999 or before- do the new rules apply to his/her beneficiaries

My explanations are in accordance with the new RMD rules. If the spouse is not the sole primary beneficiary, then the non-recalculation method must be used to determine post death distributions. The life expectancy used is that of the oldest beneficiary, however, each beneficiary may be able to use his or her own life expectancies if the following occurs: If the spouse is not the sole primary beneficiary, then the non-recalculation method must be used to determine post death distributions. The life expectancy used is that of the oldest beneficiary, however, each beneficiary may be able to use his or her own life expectancies if the following occurs: 1) If the oldest beneficiary disclaims his/her portion of the inherited assets by December 31 of the year following the year the IRA holder dies, he/she will be treated as not having been a beneficiary for purposes of calculating post death distributions. The next oldest beneficiary's ;life expectancy would be used unless the assets are separated into individual beneficiary accounts by December 31 of the year following the year the IRA holder dies 2) If the oldest beneficiary takes a full distribution of his/her portion of the inherited assets by December 31 of the year following the year the IRA holder dies, the same rules (as above applies) 3) If each beneficiary separates the inherited assets into individual inherited IRAs by December 31 of the year following the year the IRA holder dies, they will each be allowed to use their own life expectancies

Maryann is right- You cannot do this. it is not permitted by the IRS and the qualified plan would be disqualified

Check this website for a listing of states and how they treat IRA, with regards to bankruptcy protection http://www.ici.org/retirement/99_state_ira...a_bnkrptcy.html This should help

I agree with Africa. Stocks can be traded in your IRA as often as you wish. If you really want to fund an IRA this year, consider making a contribution to a traditional IRA. It may be non-deductible based on your AGI, but at least you will still make an addition to your retirement fund.

I must add that if your father did not take his required mimimum distribution (RMD) for this year ( the year he died) before he died, then the beneficiaries must take this RMD amount. This amount, even though it represents HIS RMD, must be reported in the social security number of the beneficiaries- not the deceased. For some custodians, this means moving the assets to the inherited IRAs established for the beneficiaries.

Yes.

Strath, Your participation in a SIMPLE IRA or any other employer sponsored plan does not affect your ability to contribution to a Roth or even a traditional IRA. While it may affect your ability to deduct contributions made to a traditional IRA, it has no impact on your Roth IRA contribution as such contributions are never deductible. Your only concern is to ensure that you have compensation up to the amount contributed to your Roth IRA-. Reminder- the maximum amount that can be contributed to an IRA , inclusing Roth IRAs , as a participant contribution, is 100% of compensation, up to $2,000.

To the first part of your response, the answer is correct. A SEP IRA can be transferred to any other SEP or traditional IRA . To the second part of your response- there is no limit on the number of times you can transfer IRAs to IRAs, including SEP IRAs to SEP IRAs or SEP IRAs to traditional IRAs or vice versa. The once per 12-month limitation you mentioned applies to ROLLOVERS. This rules states that if a DISTRIBUTION is taken from one IRA and rolled to another ( or the same )IRA, another distribution from the IRA (from which the first distribution was taken) cannot be rolled over if it is taken within twelve months

There is no official notification required to terminate a SIMPLE IRA plan. The employer, out of courtesy, should notify the employees. Remember that in order for a SIMPLE IRA to be maintained each year, the employer must give employees a sixty-day notification. For example, if the plan were established by October 1, 2000 for the 2000 tax year, the employer would be required to give the employees the sixty-day notification, starting the day the plan was adopted. if the employer intended to continue with the plan for year 2001, then the employer would be required to give the employees another notification, on or before November 1, 2000. Employees would have from this date through December 31, to decide is they wanted to participate in the SIMPLE. This notification must be provided by Every November 1, if the employer intends to continue with the plan for the next year. If no notification is given, then it means that the plan will not be maintained the next year, and the employer would be allowed to maintain another type of plan. Regarding the two years that the plan was not funded, if these notices were not provided, then you may not have an issue. However, is they were- we need to look at a few things at least. 1. Melody , if the employees made deferral contributions, the employer would be required to make employer matching contributions, if the employer elected the matching contribution election 2. If the employer chose the non-elective contribution election, then a contribution should have been made for all eligible employees. 3. If no notification was provided by the employer, then the SIMPLE was not in effect, and no deferrals should have been made. If any deferrals were made, or any other contribution, then these contributions are deemed excess contributions. Finally, as with any issue that involve retirement plan or coul have tax implications, clients should consult a certified -compent tax advisor

Oh-boy Royboy. I was waiting to see if anyone wlese would take this. I think no-one did because of the filling out of the form bit- there could be tax implications with that piece y'know. I included your query with my response, to ensure that I cover all the areas that I can. My response will be in BLOCK capitals and will be embedded in your query. ********************************************* ********************************************** 'HOPE I COVERED EVERYTHING. IF YOU HAVE FOLLOW-UP QUESTIONS, JUST ASK. IT MAY TAKE MORE THAN A DAY FOR ME TO RESPOND AS I AM TRAVELLING ON BUSINESS FOR THE NEXT FEW DAYS. HOWEVER, I WILL CHECK IN WHEN TIME PERMITS

ntaylor, You may recharacterize the Roth IRA to a traditional IRA. You may then take a deduction for the contribution if your income threshold permits. This IRS link provides information on deductibility . http://www.irs.gov/forms_pubs/pubs/p5900108.htm

I understand. This was not meant to be a criticism, just a mere attempt to clarify the issue, for those that may read and misconstrue the instructions. From my experience with my clients, most lay-people do. Therefore, it helps to state clearly, what the IRS implies. You are apparently very knowledgable on the subject.I would love to see a copy of your 9/22 analysis. Could you attach the link (url) in a response? Thanks Appleby

ViralShah, qualifying my response. It seems that the Form 8606 is not required to be filed with the IRS, unless you are doing a conversion , recharacterization or taking a distibrution from your Roth IRA. This is not your case, therefore you are not required to file this form, or any other form with your 1040- with regards to the Roth IRA contribution. However, the instructions for filing 8606 ( which can be found here http://ftp.fedworld.gov/pub/irs-pdf/i8606.pdf) indicate that the Roth IRA Contribution Worksheet , should be completed and kept for your records. This is to help you keep track of the basis in your Roth IRA and should be used as reference , to determine applicable taxes, on future Roth IRA distributions.

If I may jump in here. Africa's intrepretation of the reg. is correct. However, I must make a qualification. mcdonnell, you are right in stating what the instructions say. However, instructions, like most other IRS documents, need to be crossed referenced with the regulations , if one needs in-depth explanations. According to 408(d)(), a return of excess contribution after the due date is not taxable "to the extent that such distribution of any contribution exceeds the amount allowable as a deduction under section 219..." The refereced amount under 219 is $2,000. Ergo, any return of excess contribution in excess of $2,000 will be subjected to ordinary income taxes and an additional 10% premature penalty is the participant is under the age of 59 1/2.

Roger, This link provides information on the Roth IRA. http://www.irs.ustreas.gov/forms_pubs/pubs...bs/p590ch02.htm Please note if you intend to move your 401(k) assets to a Roth IRA, they must first be rolled to a traditional IRA. The assets can then be converted from the traditional IRA to the Roth IRA. Distributions from IRAs that are used for a first time home purchase are not subjected to the 10% early withdrawal penalty that usually applied to IRA owners who are under the age of 59 ½

I assume that the $4,000 was split -$2,000 for you and $2,000 for your wife. You may recharacterize the contributions to Roth IRAs. As deductions are not permitted for Roth IRA contributions, you will not be subjected to income tax when you eventually take a distrbution- unless the distribution is non-qualified, at which time you will pay taxes ONLY on the earnings and a 10% pre-mature penalty , also on the earnings if you are under the age of 59 1/2)

Yes. You must complete the applicable sections of the IRS Form 8606 and attach it to your Form 1040

Not necessarily- Take at look at the results of this survey, published by The Investment Company Institute (ICI). http://www.ici.org/retirement/99_state_ira...a_bnkrptcy.html In all cases, traditional IRAs and SEP IRAs are offered ( or not offered)the same level of protection,

dmb, It is really up to the participant. As stated earlier, 'SEP' is just a way of tagging the IRA to indicate that SEP contributions are being made to the IRA. The fact that it is tagged 'SEP', does not change the fact that it is just an IRA. I hope this helps