New kind of IRA and new rules for old IRAs

Article Abstract:

Eligible taxpayers could choose among a deductible, nondeductible or spousal individual retirement account (IRA) before TRA '97 was implemented. After its implementation on Jan 1, 1998, however, the complexity of retirement decisions escalated with the addition of the new Roth IRA to the three traditional IRAs. Also referred to as a 'back-loaded' IRA, Roth IRA also allows eligible taxpayers to make nondeductible contributions. However, for a joint return, the taxpayer should have earned income and an adjusted gross income of $150,000 or less while $95,000 or less is required under a single return. TRA '97 has also effected a few other changes, such as the definition of an active participant and qualified distributions. The latter has included two new categories, namely, higher education expenses and first-time home buyers.

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Proposed regs. offer guidance on Roth IRAs

Article Abstract:

Clarifications regarding Roth individual retirement accounts (IRAs) were provided with the issuance of proposed regulations by the IRS. Prop Reg 1.408A-2 provides that taxpayers intending to set up a Roth IRA should ensure that the irrevocable trustee-issued document is clear that the account is indeed a Roth IRA. Meanwhile, Prop Reg 1.408A-3 contains a discussion of the rules surrounding contribution, which may be regular or qualified rollover contributions. Prop Reg 1.408A-4 explains the two conditions that need to be met for the conversion of traditional IRAs to Roth IRAs. Lastly, Prop Reg 1.408 1.408A-5 characterizes situations where contributions to one IRA type may be reclassified as being given to a different IRA type.

Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Employee Benefits & Services, Pension & Benefit Regulation, Human resource management, Pensions, Employee benefits

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New IRA rules create important tax choices

Article Abstract:

Tax law reforms have increased the gross income ceilings on individual retirement (IRA) deductions for both single taxpayers and married couples. The ceiling for single payers will slowly rise from $30,000 to $50,000 by 2005 while the income limit for married couples will increase from $50,000 to $80,000 by 2007. However, payors shall have the option of establishing Roth IRAs as opposed to deductible IRAs. Roth IRA contributions have the advantage of being exempted from the 10% tax on early withdrawals provided that the payor is at least 59.5 yrs of age and that the account has been open for at least five yrs. Other criteria may also be used to satisfy the requirements for Roth IRAs.

Analysis, Taxation

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