Question 1

John is a single 40-year-old landscape architect earning $125,000 a year and is not covered by a pension plan at work. How much can he put into a Traditional IRA in 2019?

Accepted Answer

The answer of John is a single 40-year-old landscape architect...

Question 2

Steven is 27 years old and has a total AGI of $110,000 in 2019. He contracts pneumonia in 2019 and incurs a medical bill that totals $7,500. He withdraws $7,500 from his traditional IRA to pay the bill. Which of the following is true?
A)He is not subject to penalties on the IRA withdrawal because it was for medical expenses.
B)He is not subject to penalties on the IRA withdrawal because he was disabled by pneumonia for 2 weeks.
C)He is subject to penalties on the IRA withdrawal because a person may not take a withdrawal from a traditional IRA until they are 59½ years old no matter what.
D)He is subject to penalties on the IRA withdrawal because the withdrawal did not cover a portion of medical bills that exceeded 10 percent of his AGI.
E)None of these is correct

Accepted Answer

Steven is subject to penalties because the withdrawal did not cover medical expenses exceeding 10% of his AGI, which is the threshold for penalty-free withdrawals for medical expenses.

Question 3

Contributions by a self-employed individual to a SEP plan for 2019 are limited to the lesser of a percent of net earned income or:
A)$19,000
B)$0
C)$55,000
D)$56,000
E)None of these is correct

Accepted Answer

For the year 2019, contributions by a self-employed individual to a SEP (Simplified Employee Pension) plan are limited to the lesser of a specific percentage of net earned income or $56,000.

Question 4

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA in 2019?
A)$550
B)$610
C)$1,220
D)$3,000
E)$6,000

Accepted Answer

For 2019, the maximum contribution limit for a Roth IRA was $6,000 for individuals under the age of 50. Donald's salary and interest income do not affect his ability to contribute the maximum amount, provided his modified adjusted gross income (MAGI) falls within the allowable limits for Roth IRA contributions.

Question 5

Jody is a physician (not covered by a retirement plan) with a salary of $40,000 from the hospital where she is employed. She supports her husband, Andre, who sells art work and has no earned income. Both are in their twenties. What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2019 tax year?
A)$5,500
B)$6,000
C)$12,000
D)$11,000
E)None of these

Accepted Answer

For the 2019 tax year, the maximum IRA contribution limit was $6,000 per individual under the age of 50. Since both Jody and Andre are eligible to contribute to their IRAs (Jody with earned income and Andre as a spouse with no earned income), they can each contribute the maximum of $6,000, making the total maximum contribution $12,000.

Question 6

Which of the following statements is correct?
A)Contributions to SEP plans by self-employed taxpayers are generally limited to the lesser of 15 percent of their net earned income (before the SEP deduction) or $45,000.
B)The contribution limits for SEPs are the lesser of 25 percent of net self-employment income after the deduction for the contribution to the SEP or $56,000 for a self-employed taxpayer.
C)Employees may elect to make annual contributions to 401(k) plans up to the lesser of 15 percent of their net earned income (before the 401(k) deduction) or $55,000.
D)The contribution limits for SEPs are a maximum of $19,000 ($25,000 for taxpayers 50 or older).

Accepted Answer

Contributions to SEP plans by self-employed taxpayers are generally limited to 25 percent of net self-employment income after the deduction for the contribution to the SEP or $56,000 for a self-employed taxpayer. Option A is incorrect because it is an outdated contribution limit. Option C refers to the contribution limits for 401(k) plans, not SEPs. Option D refers to the contribution limits for individual taxpayers, not self-employed taxpayers specifically.

Question 7

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2019, assuming they earn $85,000 in total and are not participants in pension plans?

Accepted Answer

The answer of What is the maximum amount a 55-year-old...

Question 8

If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

Accepted Answer

This statement is false. A Section 401(k) plan that allows for employee contributions from their compensation is still considered a "qualified" plan as long as it meets certain requirements, such as nondiscrimination testing and contribution limits.

Question 9

Debbie is 63 years old and retired in 2017. She receives Social Security payments of $12,000 a year and interest income of $30,000. She wishes to put the maximum allowed into an IRA. How much can she contribute to her IRA?

Accepted Answer

The answer of Debbie is 63 years old and retired...

Question 10

In 2019, the adjusted gross income (AGI) limitation on medical expenses is 15 percent.

Accepted Answer

In 2019, the adjusted gross income (AGI) limitation on medical expenses was 10 percent, not 15 percent.

Question 11

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2019, assuming they earn $50,000 in total and are not covered by pension plans?

Accepted Answer

The answer of What is the maximum amount a 30-year-old...

Question 12

Under the SEP plan provisions, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is $20,000 are limited to:
A)$1,500
B)$2,000
C)$4,000
D)$5,000
E)None of these is correct

Accepted Answer

The maximum deductible contribution limit for an employee in a SEP plan is 25% of their net earned income up to a maximum contribution of $57,000 (for 2020). Therefore, in this scenario, the maximum deductible contribution would be ($20,000 x 25%) = $5,000.

Question 13

What is the difference between the tax treatment of contributions and distributions from a traditional IRA and a Roth IRA?

Accepted Answer

The answer of What is the difference between the tax...

Question 14

If an employer makes a contribution to a qualified retirement plan on behalf of an employee, the amount is currently deductible by the employer, and the employee must include the amount in gross income at the time the contribution is made.

Accepted Answer

Employer contributions to a qualified retirement plan are currently deductible by the employer, but they are not included in the employee's gross income at the time the contribution is made. Instead, these contributions and their earnings are taxed upon distribution.

Question 15

Barrett is a 45-year-old political commentator who has self-employed net earned income of $170,000 in 2019. What is the maximum amount he can deduct for contributions to his simplified employee pension (SEP) for the year?

Accepted Answer

The answer of Barrett is a 45-year-old political commentator who...

Question 16

Jeremy, age 38, has $25,000 in a traditional IRA account and is considering taking the money out to buy himself a new car. What will be the tax consequences to Jeremy if he withdraws the $25,000 from his IRA in 2019 for this purpose? Explain.

Accepted Answer

The answer of Jeremy, age 38, has $25,000 in a...

Question 17

Which of the following taxpayers qualifies for the maximum traditional individual retirement account deduction for 2019?
A)Married taxpayers, neither of whom is covered by a qualified retirement plan, with total adjusted gross income, all earned, of $85,000
B)A single taxpayer, who is covered by a qualified retirement plan, with adjusted gross income of $80,000
C)A single taxpayer, who is not covered by a qualified retirement plan, with no earned income but with unearned income of $12,000
D)Married taxpayers, only one of whom is covered by a qualified retirement plan, with total adjusted gross income of $200,000
E)None of these

Accepted Answer

Married taxpayers, neither of whom is covered by a qualified retirement plan, with total adjusted gross income, all earned, of $85,000 qualifies for the maximum traditional individual retirement account deduction for 2019.

Question 18

Christine is a self-employed graphics artist who has net earned income of $160,000 from her business. Christine has a defined contribution SEP Plan and plans to contribute the amount that provides the maximum deduction allowable. How much can Christine contribute?

Accepted Answer

The answer of Christine is a self-employed graphics artist who...

Question 19

Ben is a 19-year-old single software inventor earning $200,000 a year and is not covered by a pension plan at work. How much can he put into a Roth IRA in 2019?

Accepted Answer

The answer of Ben is a 19-year-old single software inventor...

Question 20

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA:
A)Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child
B)Withdrawing up to $30,000 of first-time home-buying expenses
C)Using the withdrawals for medical expenses in excess of 10 percent of their AGI, for persons younger than 59½ years old
D)Over 59½ years old

Accepted Answer

The correct choice is B because the IRS allows a penalty-free withdrawal from an IRA for first-time home-buying expenses, but the limit is up to $10,000, not $30,000. Choices A, C, and D are indeed exceptions to the 10% early withdrawal penalty.

Quiz 5: Deductions for and From AGI

John is a single 40-year-old landscape architect earning $125,000 a year and is not covered by a pension plan at work. How much can he put into a Traditional IRA in 2019?

Steven is 27 years old and has a total AGI of $110,000 in 2019. He contracts pneumonia in 2019 and incurs a medical bill that totals $7,500. He withdraws $7,500 from his traditional IRA to pay the bill. Which of the following is true?

Contributions by a self-employed individual to a SEP plan for 2019 are limited to the lesser of a percent of net earned income or:

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA in 2019?

Which of the following statements is correct?