Comprehensive Test No. 8

1. True or False: A Traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA.

True

False

Publication 17; Pages 120 & 121

Explanation

Publication 17; Pages 120 & 121

2. True or False: Contributions can be made to your Traditional IRA for 2014 anytime during 2014 or by the due date of the return (Aril 15, 2015), including extensions (October 15, 2015).

True

False

Publication 17; Page 122

Explanation

Publication 17; Page 122

3. True or False: In order to qualify for a Moving Expense Deduction for 2014, a taxpayer's move must be closely related in time to the start of work at his/her new job location. In other words, moving expenses incurred within one year from the date he/she reported to work at the new job location are considered closely related in time.

True

False

Publication 521

Explanation

Publication 521

4. True or False: In order to qualify for a Moving Expense Deduction for 2014, a taxpayer's move must meet the distance test. In other words, the taxpayer's new main job location must be at least 50 miles farther from his/her former home than his/her old job location was from his/her former home.

True

False

Publication 521

Explanation

Publication 521

5. Assume you are filing Form 1040. Explain how you would report a distribution from one Traditional IRA that was totally "rolled over" into another Traditional IRA within the time limit permitted.

Enter the total distribution amount on line 11a; enter zero on line 11b. Write "Rollover" next to line 11b.

Enter the total distribution amount on line 12a; enter zero on line 12b. Write "Rollover" next to line 12b.

Enter the total distribution amount on line 15a; enter zero on line 15b. Write "Rollover" next to line 15b.

Enter the total distribution amount on line 16a; enter zero on line 16b. Write "Rollover" next to line 16b.

Publication 17; Page 126

Explanation

Publication 17; Page 126

6. Assume you are filing Form 1040. Explain how you would report a distribution from an employer plan that was partially "rolled over" into a Traditional IRA within the time limit permitted.

Publication 17; Page 126

Explanation

Publication 17; Page 126

7. True or False: Today is February 1, 2015 and Sherman wishes to file his 2014 tax return. He asks for your help. When the return is finished you inform Sherman that he has a balance due to the IRS. Upon further review of the return, you inform Sherman that if he takes an IRA deduction on his return he will get a refund. He informs you that he did not make any contributions to his Traditional IRA during 2014. However, Sherman can take the deduction for a Traditional IRA on his return, get the refund and make the deposit into his Traditional IRA by April 15, 2015.

True

False

Publication 17; Page 122

Explanation

Publication 17; Page 122

8. Assuming you are married and have less compensation than your spouse, you file a joint return, that you and/or your spouse hade $50,000 in combined total compensation, that your spouse made no contributions to either a Traditional or Roth IRA for the year, that you made the maximum contribution (whatever it is) to a Traditional IRA, your spouse is age 48, you are age 51 and that you are allowed a full deduction for your contribution. What is the maximum deductible dollar amount of your "Kay Bailey Hutchinson Spousal IRA" for tax year 2014? (No contribution was made to a 501(c)(18) plan on your behalf.)

$5,000

$5,500

$6,000

$6,500

Publication 17; Page 122

Explanation

Publication 17; Page 122

9. Samantha is an unmarried, 22 year old college student. She worked part time during 2014 and earned $4,279. What is the maximum amount Samantha will be able to contribute to a Traditional IRA for tax year 2014?

$5,500

$6,500

$4,279

Publication 17; Page 121

Explanation

Publication 17; Page 121

10. Festus is 50 years old, single and earned $50,000 during 2014. What is the maximum contribution he will be able to make to a Traditional IRA for tax year 2014?

$5,500

$6,500

$50,000

Publication 17; Page 121

Explanation

Publication 17; Page 121

11. Julie is age 42, single and earned $38,000 during 2014. What is the maximum contribution she will be able to make to a Traditional IRA for tax year 2014?

$5,500

$6,500

$38,000

Publication 17; Page 121

Explanation

Publication 17; Page 121

12. True or False: In a community property state, one spouse working and earning $60,000 may be considered $30,000 earned by each. This means that both spouses are considered to have compensation for purposes of being able to set up an IRA.

True

False

Publication 17; Page 121

Explanation

Publication 17; Page 121

13. True or False: For tax year 2014, the combined total contribution to a taxpayer's Traditional IRA and his/her spouse's IRA on a joint return can be as much as $11,000 ($12,000 if only one of you is older than 50, $13,000 if both of you are 50 or older).

True

False

Publication 17; Page 122

Explanation

Publication 17; Page 122

14. Check the correct statement(s) below.

Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument.

To be alimony the payment must meet certain requirements.

Alimony is deductible by the payer and must be included in income by the recipient.

ALL OF THE ABOVE.

Publication 17; Pages 133-135

Explanation

Publication 17; Pages 133-135

15. What form should you use to report contributions to, and, distribution from a Health Savings Account (HSA)?

Form 5498-SA

Form 1099-SA

Form 8889

Form 8853

Publication 969

Explanation

Publication 969

16. CHECK ALL THAT APPLY: Check the statement(s) below that correctly describe a "TRADITIONAL IRA".

A Traditional IRA may be opened with a mutual fund, insurance company or through your stockbroker.

A Traditional IRA can be opened at a bank or other financial institution.

Some or all of your contributions to a Traditional IRA may be deductible, depending on your circumstances.

Earnings and gains on a Traditional IRA are generally not taxed until they are distributed.

ALL OF THE ABOVE

Publication 17; Pages 120 &121

Explanation

Publication 17; Pages 120 &121

Submit

17. CHECK ALL THAT APPLY: Check the item(s) below that would be included when talking about compensation as it relates to setting up Traditional IRAs.

Wages

Salaries

Interest Income

Dividend Income

Bonuses

Deferred compensation received

Foreign earned income (excluded)

Rental income

Commissions

Professional fees

Taxable alimony

Publication 17; Page 121

Explanation

Publication 17; Page 121

Submit

18. With the information provided below, identify the taxpayer(s) that would be entitled to a partial Traditional IRA deduction for tax year 2014.

A single taxpayer with a modified adjusted gross income (MAGI) of $62,925, covered by an employer plan.

A married taxpayer filing a joint return with a MAGI of $97,000 who is covered by an employer plan.

A qualifying widow(er) not covered by an employer plan whose MAGI is $250,000.

A taxpayer filing as head of household with a MAGI of $69,384, who is covered by an employer plan.

Publication 17; Pages 122-124 (Tables 17-1 & 17-2 on page 123)

Explanation

Publication 17; Pages 122-124 (Tables 17-1 & 17-2 on page 123)

Submit

19. CHECK ALL THAT APPLY: Check the correct statement(s) below.

To designate IRA contributions as nondeductible, you must file Form 8606.

ALL OF THE ABOVE.

Publication 17; Page 124

Explanation

Publication 17; Page 124

20. Determine the additional tax (penalty) that a taxpayer would have to pay on the Traditional IRA distribution given the following circumstances. The taxpayer had two such IRAs from which he received a distribution during 2014. On one, the total amount received was $13,214. Over the years, he made a total of $4,963 in nondeductible contributions to tis IRA. On the other, he received a total of 21,847. The total amount that was originally contributed to this IRA was done so in the form of a total rollover from a previous employer's pension plan. He had never included any part of this pension in his income. The taxpayer is age 52 and does not qualify for an exception to the additional tax for 2014. What is the amount of the additional tax (penalty) for 2014? (Please round off your final answer.)

$3,100

$3,001

$3,010

Publication 17; Page 130

Explanation

Publication 17; Page 130

21. If there are no IRA distributions, recharacterizations, or "Traditional IRA or SEP/SIMPLE IRA-TO-ROTH conversions", how would a taxpayer's return (specifically Form 8606) be affected if s/he simply made a contribution (not an excess contribution) to a Roth IRA for the year? (Examine Form 8606 included with your test material.)

There are no reporting requirements.

Publication 17; Page 130

Explanation

Publication 17; Page 130

22. Check the item(s) below that are characteristic of a high deductible health plan (HDHP).

An HDHP has a higher annual deductible than a typical health plan.

An HDHP may provide preventive care benefits without a deductible or with a deductible below the minimum annual deductible.

Out-of-pocket expenses include copayments and other amounts, but do not include premiums.

ALL OF THE ABOVE.

Publication 969

Explanation

Publication 969

23. What form should you receive if you made contributions to a Health Savings Account (HSA) or Medical Savings Account (MSA) during the year?

Form 5498-SA

Form 1099-SA

Form 8889

Form 8853

Publication 969

Explanation

Publication 969

24. What form should you receive if you made a distribution from a Health Savings Account (HSA) or Medical Savings Account (MSA) during the year?

Form 5498-SA

Form 1099-SA

Form 8889

Form 8853

Publication 969

Explanation

Publication 969

25. CHECK ALL THAT APPLY: Choose the kind(s) of Traditional Ira(s) that a person may set up or have set up on his/her behalf.

SEP IRA (Part of a Simplified Employee Pension)

SIMPLE IRA (Savings Incentive Match Plans for Employees)

Individual Retirement Account

Individual Retirement Annuity

ROTH IRA

Part of an employer or employee association trust account.

Publication 17; Page 121

Explanation

Publication 17; Page 121

Submit

26. CHECK ALL THAT APPLY: Check the correct statement(s) below.

To be a Roth IRA the account or annuity must be designated as a Roth IRA when it is opened.

You may be able to establish and make nondeductible contributions to a Roth IRA regardless of your age.

You can leave amounts in a Roth IRA as long as you live.

Qualified distributions from a Roth IRA are tax free if certain requirements are met.

Publication 17; Pages 130-132

Explanation

Publication 17; Pages 130-132

Submit

27. Check the true statement(s) below that pertain to a Health Savings Account (HSA).

You must get permission or authorization from the IRS to establish an HSA.

The HSA can be established through a trustee that is different from your health plan provider.

An HSA is "portable", so it stays with you if you change employers or leave the work force.

You must be an eligible individual to qualify for an HSA. (Everyone is considered an eligible individual.)

Distributions from an HSA are tax free if used to pay qualified medical expenses.

Publication 969

Explanation

Publication 969

Submit