Tax Treatment of Individual Retirement Arrangements
Federal tax policy is designed to accomplish numerous goals, from funding government to encouraging socially-beneficial actions such as saving for retirement. ERISA, the Employee Retirement Income Security Act, was created principally to meet the latter objective.

ERISA created an individual retirement arrangement—usually referred to simply as an IRA—to encourage taxpayers who were not participants in an employer-sponsored qualified retirement plan to save money to fund their future retirement needs. That was the initial legislative action. In order to participate, you needed to be employed and not a participant in a pension, profit-sharing or other qualified plan.

These early ERISA provisions offering tax benefits to individuals funding IRAs have been extended in subsequent legislative actions to:
  • Unemployed spouses;
  • Qualified retirement plan participants; and
  • Taxpayers preferring tax-free distributions instead of deductible contributions. 
Early expansion of the IRA provisions added a spousal IRA that is designed to provide retirement assistance to uncompensated homemakers. It was also expanded to allow employees who are covered under an employer-sponsored qualified pension or profit-sharing plan to contribute to an IRA.

Since that earlier ERISA expansion related to IRAs, new IRAs have been added, including Roth IRAs that offer tax-free qualified distributions rather than deductible contributions. In order to differentiate the newer Roth IRA from its earlier cousin, the original IRA is now referred to as a “traditional” IRA.

Course Publication Date: April 01, 2018

This course is available with NO ADDITIONAL FEE if you have an active self study membership or can be purchased for $20.00!

Author:Paul Winn
Course No:TAX-IRAS-3098
Recommended CPE:2.00
Delivery Method:QAS Self Study
Level of Knowledge:Overview
Prerequisites:None
Advanced Preparation:None
Recommended Field of Study:Taxes
  
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Learning Objectives
  • Apply the rules governing eligibility and permitted contribution levels applicable to traditional IRAs.
  • Identify the requirements and benefits related to a spousal IRA.
  • List the rules governing the tax treatment of contributions to and distributions from a traditional IRA.
  • Recognize the traditional IRA distribution rules.
  • Eligibility and permitted contribution levels applicable to Roth IRAs.
  • The tax treatment of contributions to and distributions from Roth IRAs.
  • Roth IRA distributions.

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