Roth IRA Answer Book, Sixth Edition, provides an up-to-the-minute tutorial on this subject for a wide variety of professional markets, including pension consultants, insurance agents, financial planners and investment advisors, plan administrators, lawyers, and accountants, as well as businesses that promote, market, service, or provide technical support to retirement plans, products, and related services.
You'll find in-depth coverage of the administration and operation of a Roth IRA, as mandated by the Internal Revenue Code, Treasury regulations, and other IRS guidance. Written by a team of practicing experts preeminent in their fields, Roth IRA Answer Book takes the reader, step by step, through the creation, operation, and extinction of a Roth IRA.
Topics covered include the following:
- How a Roth IRA is established, how documents are designated, and how a Roth IRA may be revoked
- Trustee and custodian disclosure requirements and governmental form reporting requirements - Forms 1099-R, 5329, and 8606
- Limits on contributions, including the contribution phase-out rules, and the definition of modified adjusted gross income (MAGI)
- How the taxation of a Roth IRA distribution depends upon the source of funding for the amount distributed
- How abusive transactions having the effect of shifting value from a preexisting business into a Roth IRA for less than fair market value may be challenged
- How the contribution recovery rules under the ordering rules determine whether a Roth IRA distribution consists of annual contributions, conversions from an eligible retirement plan, other rollover contributions, or earnings
- How to make and treat a rollover (conversion) from an eligible retirement plan to a Roth IRA
- Which taxpayers will benefit most from a conversion, and when (especially in a declining investment environment) can a conversion be undone in a recharacterization
- How Roth IRAs may be used to enhance overall wealth-transfer planning
- The treatment of penalty-free distributions from an eligible retirement plan for special purposes, such as hurricane distributions, qualified recovery assistance distributions, qualified disaster recovery distributions, and qualified reservist distributions
- How and when special-purpose distributions may be repaid (rolled over) to an eligible retirement plan, including a Roth IRA
- And more!
Roth IRA Answer Book has been updated to include:
- Discussion of the procedural guidance issued in December 2010 to drafters of pre-approved model and prototype IRAs and Roth IRAs, including rules for when documents must be submitted to the IRS
- Explanation of the new procedures for applying to the IRS for an opinion letter
- When the IRS lost an "abusive transaction" case
- Analysis of the 2010 proposed regulations broadly redefining when a person is considered to be a "fiduciary" by reason of giving investment advice
- The new in-plan Roth rollover rules and the guidance issued in Notice 2010-84 regarding the distribution and taxation of in-plan rollovers
- The status of an inherited Roth IRA under evolving Federal Bankruptcy rules
- Several new appendix charts have been added covering:
- Rollovers by participants
- Rollover of inherited assets
- RMDs upon death of beneficiary
- Distributions to beneficiaries
- Amendments to the definition of compensation to include differential wage payments
- Recent law developments about whether a power of attorney is or is not effective to permit a participant's agent to name a beneficiary
- How the law about IRAs' and other retirement plans' death benefits is sometimes similar to, but often quite different from, the law that applies to a person's disposition of his or her other wealth
- Application of the required minimum distribution (RMD) rules to an inherited Roth IRA
- Discussion of statutory changes since the 2002 mandatory changes relating to the qualification of Roth IRAs, including changes that:
- Allow for the repayment of qualified hurricane distributions
- Eliminate the $100,000 modified adjusted gross income limit and the joint filing requirement for certain qualified rollover contributions
- Treat combat zone compensation to be taken into account for purposes of making a contribution
- Allow rollovers into Roth IRA from eligible retirement plans
- Allow for the repayment of reservist distributions
- Allow for nonspouse beneficiary rollovers
- Treatment of certain military death gratuities as qualified rollover contributions
- The repayment of disaster distributions
- The extension of the qualified charitable distribution rules
- Clarification of when the beneficiary of an inherited Roth IRA can take a RMD from a different Roth IRAs
- The rollover of amounts received from military death gratuity or service members' group life insurance, and amounts received as part of an airline payment
- Discussion of the nonstatutory variables that affect decisions regarding Roth IRA conversions
- 1. Introduction to Roth IRAs
- Establishing a Roth IRA
- Model Roth IRA Documents
- Records Retention
- Revoking a Roth IRA
- Prototype Roth IRA Documents
- Prohibited Transactions and Related Definitions
- Miscellaneous Rules
- 2. Annual Contributions to a Roth IRA
- Limits on Annual Contributions
- Phaseout Rules
- Age and Plan Participant Status
- Annual Contribution Deadline
- Excess Contributions
- Tax Credits for Contributions
- Deemed Roth IRAs
- Payroll Deduction Roth IRA Programs
- 3. Conversion, Contribution Recharacterization, and Rollovers
- Conversion of Traditional IRA to Roth IRA
- Eligibility
- Taxation
- Valuing Annuity Contracts Converted to a Roth IRA
- Contribution Recharacterization
- SEP IRA/SIMPLE IRA
- Rollovers
- Deemed IRAs
- Rollover of Military Death Gratuities and SGLI Payments
- Rollover of Exxon Valdez Settlement
- Qualified Reservist Distribution Repayments
- Qualified Hurricane Distribution Repayments
- Qualified Recovery Assistance Distributions Repayments (Kansas Disaster Area)
- Qualified Disaster Recovery Assistance Distribution Repayments (Midwestern Disaster Areas)
- Rollover of Airline Payments
- 4. Voluntary Distributions
- Qualified Distributions
- Nonqualified Distributions
- Five-Year Exclusion Periods
- 10 Percent Premature Distribution Penalty
- Withholding
- Transfers Between Roth IRAs
- Transfers Incident to Divorce
- Deductions for Losses
- Demutualization
- Deemed Roth IRAs
- Qualified Roth IRA Contribution Programs (Designated Roth Contributions)
- 5. Required Minimum Distributions
- Five-Year Rule
- Beneficiaries
- Subsequent Beneficiaries
- Penalties
- Tax Matters
- Deemed Roth IRAs
- 6. Financial Planning
- The Basic Considerations
- AGI/MAGI
- Conversion Considerations
- State Law Considerations
- Inherited IRA
- Life Insurance to Pay Estate Tax
- 7. Roth IRA Trusts
- Drafting Considerations
- Roth IRA Trust Distribution Rules
- Generation-Skipping Trust
- Funding Clauses
- Disclaimers
- Taxation
- Permissible Transfer
- QTIPing a Roth IRA
- 8. Beneficiary Designations and Estate Planning
- Making a Beneficiary Designation
- Using Trusts
- Family Rights That Restrain a Beneficiary Designation
- Charitable Gifts
- Simultaneous Death; Absentees
- Marriage
- Spouse's Rights
- Disclaimers
- Government Claims
- Unclaimed Property
- Tax-Oriented Estate Planning
- Qualified Domestic Trust for an Alien
- Giving Advice
- 9. Required Reporting for Roth IRAs
- Reporting Roth IRA Contributions on Form 5498
- Information to Be Provided to IRA Owner (or Beneficiary)
- Deceased IRA Owner
- Recharacterization Contributions
- Revoked Roth IRAs
- Penalties
- Records Retention
- Reporting Roth IRA Distributions on Form 1099-R
- When Form 1099-R Is Not Used
- Conversion
- Recharacterization
- Revoked Roth IRAs
- Correcting1099-Forms
- Penalties
- Merger of Trustees and Custodians
- Records Retention
- Federal Income Tax Return (Form 8606)
- 10. Designated Roth Contribution Programs
- Contributions to Designated Roth Accounts
- Designation Roth Accounts
- Distributions from Designated Roth Accounts
- Rollovers of Designated Roth Contributions
- Excess Contributions
- Reporting and Recordkeeping Requirements for Designated Roth Accounts
- APPENDIX A: Roth IRA Charts and Tables
- Traditional IRA and Roth IRA Comparison Chart for 2009
- Traditional IRA Deduction Restrictions for Active Participants
- Restrictions on Roth IRA Contributions for High-Income Taxpayers
- Roth IRA Distribution Taxation
- Traditional/Roth IRA Eligibility for 2009 - married
- Traditional/Roth IRA Eligibility for 2009 - single
- Distribution to Beneficiary Chart
- IRA and Roth IRA Distribution Flowchart
- Annual Roth IRA Contribution Limits
- MAGI Phaseout Chart
- APPENDIX B: Extracts from Relevant Code Sections (As of June 1, 2008)
- Code Section 408A: Roth IRAs
- APPENDIX C: IRA Legacy Trust - Sample Provisions
- IRA Legacy Family Revocable Trust
- IRA Legacy Family Trust - For Benefit of Children and Issue of Any Deceased Child - Separate Shares
- IRA Legacy Grandchildren's Trust
- APPENDIX D: Extracts from Treasury Regulations
- Preamble, Final Treasury Regulations Section 1.408A
- Preamble, Final Treasury Regulations Section 1.408A-4
- Treasury Regulations Section 1.408A-1 through 1.408A-10
- APPENDIX E: Revenue Procedures, Announcements, and Notices
- Revenue Procedures 2006-13, 2006-3 IRB 315
- Notice 2007-7, Section IX, 2007-5 IRB 395
- Notice 2006-44, 2006-20 IRB 889
- Announcement 2008-44, 2008-20 IRB 892
- Announcement 2007-55, 2007-1 I.R.B. 1384
- Notice 2008-30, 2008-12 IRB 638
- Notice 2004-8, 2004-4 IRB 333
- APPENDIX F: Pension and Welfare Benefits Administration (PWBA) Opinion Letter
- APPENDIX G: Lists of Required Modifications and Information Packages (LRMs)
- Roth IRA List of Required Modifications and Information Package (Dated: May 2007)
- Cash or Deferred Arrangement (CODA) List of Required Modifications and Information Package (Dated: January 2006)
- APPENDIX H: Employee Benefit Limits
- TABLES
- INDEX
Gary S. Lesser, Esq., is the principal of GSL Galactic Consulting, located in Indianapolis, Indiana. Mr. Lesser maintains a telephone-based consulting practice providing services to other professionals and business owners. He is a nationally known author, educator, and speaker on retirement plans for individuals and smaller businesses. Mr. Lesser has broad technical and practical knowledge of both qualified and nonqualified retirement plans. Mr. Lesser is the technical editor and co-author of HSA Answer Book, SIMPLE, SEP, and SARSEP Answer Book, Life Insurance Answer Book for Qualified Plans and Estate Planning, Roth IRA Answer Book and Quick Reference to IRAs, all published by Wolters Kluwer Law & Business. Mr. Lesser is also the principal author and technical editor of The CPA's Guide to Retirement Plans for Small Business Owners and the Advisor's Guide to Health Savings Accounts, publications of the American Institute of Certified Public Accountants (AICPA). He has developed several software programs that are used by financial planners, accountants, and other pension practitioners to design and market retirement plans for smaller businesses. His two software programs—QP-SEP Illustrator™ and SIMPLE IllustratorSM—are marketed and distributed nationally. He has also been published in the EP/EO Digest, Journal of Taxation of Employee Benefits, Journal of Compensation and Benefits, Journal of Pension Benefits, Life Insurance Selling, Rough Notes, and NAPFA Advisor. Mr. Lesser is an associated professional member of the American Society of Pension Professionals & Actuaries (ASPPA). In 1974, Mr. Lesser started his employee benefits career with the Internal Revenue Service as a Tax Law Specialist/Attorney in the Employee Plans/ Exempt Organizations (EP/EO) Division. He later managed and operated a pension administration and actuarial service organization, was an ERISA marketing attorney for a national brokerage firm, and was a senior vice president/ director of retirement plans for several nationally known families of mutual funds and variable annuity products. Mr. Lesser graduated from New York Law School and received his B.A. in accounting from Fairleigh Dickinson University. He is admitted to the bars of the state of New York and the United States Tax Court.
Mr. Lesser also co-authored Basic Accounting Simplified. This book helps students of accounting to think through, understand, and master the more difficult issues that will be taught as their accounting education progresses. For more information, visit www.basicaccountingsimplified.com
Denise Appleby, CISP, CRC, CRPS, CRSP, APA, is a retirement plans consultant, trainer, freelance writer, editor and owner of Appleby Retirement Plans Consulting, located on the web at www.applebyconsultinginc.com and www.RetirementDictionary.com. Denise's retirement plans related experiences include working as a Retirement Plans Product Manager, Training Manager, Compliance Consultant, Technical Help Desk Manager and Writer. She has written over two hundred articles for many financial newsletters including www.Investopedia.com, Pershing LLC's SixtySomething, The Pershing Press and Ed Slott's IRA Advisor. Denise is also a co-author of The CPA's Guide to Retirement Plans for Small Businesses, a publication of the American Institute of Certified Public Accountants (AICPA).
Denise is a frequent speaker at seminars where she explains the importance of saving for retirement, and how to prevent paying avoidable taxes and penalties on distributions from retirement plans. Denise has appeared on CNBC's Business News, where she gave insights on saving and planning for retirement. Denise has earned the following professional designations: The Accredited Pension Administrator (APA) from the National Institute of Pension Administrators, the Certified IRA Services Professional (CISP) designation from the Institute of Certified Bankers; the Chartered Retirement Plans Specialist (CRPS) designation from the College for Financial Planning; Certified Retirement Services Professional (CRSP) designation from the Institute of Certified Bankers; and the Certified Retirement Counselor (CRC) designation from the International Foundation for Retirement Education (InFRE).
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