Useful Links: IRS.gov Help For Hurricane Victims
News Essentials What's Hot News Releases IRS - The Basics IRS Guidance Media Contacts Facts & Figures Around The Nation e-News Subscriptions
The Newsroom Topics Multimedia Center Noticias en Español Radio PSAs Tax Scams/Consumer Alerts The Tax Gap Fact Sheets IRS Tax Tips Armed Forces Latest News
IRS Resources Compliance & Enforcement News Contact Your Local IRS Office Filing Your Taxes Forms & Instructions Frequently Asked Questions Taxpayer Advocate Service Where to File IRS Social Media
| Issue Number: Tax Tip 2020-129
Terms to help taxpayers better understand Individual Retirement Arrangements
Many taxpayers may have heard of Individual Retirement Arrangements, or IRAs, but some don't know how IRAs help them save for retirement.
People can set up an IRA with a bank or other financial institution, a life insurance company, mutual fund or stockbroker. Here's a list of basic terms to help people better understand their IRA options.
- Contribution. The money that someone puts into their IRA. There are annual limits to contributions depending on their age and the type of IRA.
- Distribution. The amount that someone withdraws from their IRA.
- Required distribution. There are requirements for withdrawing from an IRA:
- Someone generally must start taking withdrawals from their IRA when they reach age 70½.
- Per the 2019 SECURE Act, if a person's 70th birthday is on or after July 1, 2019, they do not have to take withdrawals until age 72.
- Special distribution rules apply for IRA beneficiaries.
- Traditional IRA. An IRA where contributions may be tax-deductible. Generally, the amounts in a traditional IRA are not taxed until they are withdrawn.
- Roth IRA. This type of IRA that is subject to the same rules as a traditional IRA but with certain exceptions:
- A taxpayer cannot deduct contributions to a Roth IRA.
- For some situations, qualified distributions are tax-free.
- Roth IRAs do not require withdrawals until after the death of the owner.
- Savings Incentive Match Plan for Employees. This is commonly known as a SIMPLE IRA. Employees and employers may contribute to traditional IRAs set up for employees. It may work well as a start-up retirement savings plan for small employers.
- Simplified Employee Pension. This is known as a SEP-IRA. An employer can make contributions toward their own retirement and their employees' retirement. The employee owns and controls a SEP.
- Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.
More Information: Share this tip on social media -- #IRSTaxTip: Terms to help taxpayers better understand Individual Retirement Arrangements. https://go.usa.gov/xGfuE Back to Top     
Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message. |
No comments:
Post a Comment