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Summary TAX 670 Module Six Short Paper Tax Planning.docx TAX670 Tax Planning Advice: IRA/Roth Accounts Southern New Hampshire University Facts: Client John is considering contributing to his IRA or converting to a Roth. He would like to know if he could wai$7.49
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Summary TAX 670 Module Six Short Paper Tax Planning.docx TAX670 Tax Planning Advice: IRA/Roth Accounts Southern New Hampshire University Facts: Client John is considering contributing to his IRA or converting to a Roth. He would like to know if he could wai
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TAX 670 Module Six Short Paper Tax P TAX670 Tax Planning Advice: IRA/Roth Accounts Southern New Hampshire University Facts: Client John is considering contributing to his IRA or converting to a Roth. He would like to know if he could wait a couple years before doing this as he believes there ...
tax 670 module six short paper tax planningdocx tax670 tax planning advice iraroth accounts southern new hampshire university facts client john is considering contributing to his ira or conv
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TAX670
Tax Planning Advice:
IRA/Roth Accounts
Southern New Hampshire University
Facts: Client John is considering contributing to his IRA or converting to a Roth. He would like
to know if he could wait a couple years before doing this as he believes there are severe tax
consequences to this. Also, he would like to know about the income limitations to convert from
an IRA to a Roth.
Authority:
§ 408 Individual retirement accounts.
§408A Roth IRAs.
Reg § 1.408A-3
Research:
An Individual Retirement account (IRA) is an investment account used to save for retirement.
Under § 408, the term “individual retirement account” means a trust created or organized in the
United States for the exclusive benefit of an individual or his beneficiaries, but only if the written
governing instrument creating the trust meets the following requirements:
(1) Except in the case of a rollover contribution described in subsection (d)(3) or in
section 402(c), 403(a)(4), 403(b)(8), or 457(e)(16), no contribution will be accepted
unless it is in cash, and contributions will not be accepted for the taxable year on behalf
of any individual in excess of the amount in effect for such taxable year under section
219(b)(1)(A).
, (2) The trustee is a bank (as defined in subsection (n)) or such other person who
demonstrates to the satisfaction of the Secretary that the manner in which such other
person will administer the trust will be consistent with the requirements of this section.
(3) No part of the trust funds will be invested in life insurance contracts.
(4) The interest of an individual in the balance in his account is nonforfeitable.
(5) The assets of the trust will not be commingled with other property except in a
common trust fund or common investment fund.
(6) Under regulations prescribed by the Secretary, rules like the rules of section 401(a)(9)
and the incidental death benefit requirements of section 401(a) shall apply to the
distribution of the entire interest of an individual for whose benefit the trust is
maintained.
An IRA varies in types, i.e., traditional IRS, ROTH IRA, and SEP IRA. Anyone can open a
traditional IRA that has received taxable compensation or whose spouse has received taxable
income.
In most cases, contributions made to an IRA are tax-deductible depending on several key factors:
income limitations, filing status, or if they individual has an employer-sponsored retirement plan.
Individuals can save money with an+9 IRA but should refrain from withdrawing funds from the
IRA until they reach fifty-nine and one-half because early withdrawals are taxable unless they
withdraw funds used to pay for certain educational, medical, or home expenses.
In contrast, the Roth IRA is an alternative to the traditional IRA, and it has a variety of different
tax implications. Roth IRAs are open to all individuals, regardless of age, who have received
taxable compensation but whose income does not exceed a certain amount, based on tax-filing
status (Crelin, 2019). Roth IRA contributions are non-tax-deductible. Individuals may decide to
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