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Exam 13: Retirement Savings and Deferred Compensation

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Question 41

Multiple Choice

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What is the maximum saver's credit available to any taxpayer in 2020?

A) $2,000.
B) $1,000.
C) $500.
D) It depends on the filing status of the taxpayer.

E) A) and B)
F) None of the above

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Question 42

True/False

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Taxpayers withdrawing funds from an IRA before they turn 72 are generally subject to a 10 percent penalty on the amount of the withdrawal.

A) True
B) False

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Question 43

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A taxpayer can only receive a saver's credit if she contributes to a qualified retirement account.

Kathy is 60 years of age and self-employed. During 2020 she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to a SEP IRA for 2020? (Round your final answer to the nearest whole number.)

Sean (age 74 at end of 2020)retired five years ago. The balance in his 401(k)account on December 31, 2019, was $1,700,000 and the balance in his account on December 31, 2020, was $1,800,000. Using the Treasury tables below, what is Sean's required minimum distribution for 2020?

Which of the following statements regarding Roth IRA distributions is true?

Both traditional 401(k)plans and Roth 401(k)plans are forms of defined contribution plans.

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25 percent, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59 ^th birthday and she has not yet retired?

Deborah (single, age 29)earned $26,100 in 2020. Deborah was able to contribute $1,764 ($147/month)to her employer-sponsored 401(k). What is the total saver's credit that Deborah can claim for 2020? (Use Exhibit 13-8)

Which of the following statements regarding traditional IRAs is true?

Which of the following statements regarding self-employed retirement accounts is true?

Which of the following statements regarding IRAs is false?

Which of the following is true concerning employer funding of nonqualified deferred compensation plans?

When employees contribute to a traditional 401(k) plan, they _____ allowed to deduct the contributions and they ______ taxed on distributions from the plan.

In 2020, Tyson (age 52)earned $50,000 of salary. Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2020?

Tatia, age 38, has made deductible contributions to her traditional IRA over the past few years. When her account balance was $44,000, shedirectly transferred the entire $44,000 out of her traditional IRA and immediately into a Roth IRA. Her current marginal tax rate is 25 percent. What amount of tax and penalty is she required to pay on this conversion?

Sean (age 73 at end of 2020)retired five years ago. The balance in his 401(k)account on December 31, 2019, was $1,800,000 and the balance in his account on December 31, 2020, was $1,895,000. Using the Treasury table below, what is Sean's required minimum distribution for 2020?

Kathy is 60 years of age and self-employed. During 2020, she reported $534,000 of revenues and $106,800 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k) for 2020?Assume she pays $28,348 in self-employment for 2020. (Round your final answer to the nearest whole number.)

In 2020, Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income). Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2020?

Bryan, who is 45 years old, had some surprise medical expenses during the year. To pay for these expenses (which were above the 7.5% of AGI threshold and claimed as itemized deductions on his tax return) , he received a $20,000 non coronavirus-related distribution from his traditional IRA (he has only made deductible contributions to the IRA) . Assuming his marginal ordinary income tax rate is 15 percent, what amount of taxes and/or early distribution penalties will Bryan be required to pay on this distribution?