Chapter 10 exam

An individual working part time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowed?

$2,500

Premature IRA distributions are assessed a penalty tax of

10%

What is the maximum number of employees (earning at least $5000) That an employer can have in order to start a simple retirement plan?

100

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

50%

Traditional individual retirement annuity (IRA) distributions must start by:

April 1st of the year following the year the participant turns age 70 1/2

In a qualified retirement plan, the yearly contributions to an employee's account:

Are restricted to maximum levels set by the IRS

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding

At the age of 45, an individual withdrawals $50,000 from his qualified profit sharing plan and then deposits the amount into a personal savings account. This action will result in:

Income tax and a 10% penalty assessed upon funds withdrawn from the qualified plans

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000

Which of these retirement plans can be started by an employee, even if another plan is in existence?

Individual Retirement Account (IRA)

A sole proprietor may use this plan only if the employees of the business are included:

Koegh pension plan

An employer that offers a qualified retirement plan to its employees is Illegible to:

Make tax deductible contributions to the plan

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:

Profit sharing plan

Who is normally to consider to be the owner of a 403B tax-sheltered annuity?

The employee

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

none