IRA/CESA Archive

The IRS announced 2008 pension plan limitations, and inflation adjustments applicable to IRAs and other accounts, in IR-2007-171, IR-2007-172, and Revenue Procedure 2007-66. Click here for a summary of these items as they pertain to IRAs.

IRS Notice 2008-30 provides Pension Protection Act (PPA) of 2006 guidance for provisions effective in 2008. The notice addresses PPA sections 824 (relating to rollovers from eligible retirement plans to Roth IRAs); 1004 (relating to additional survivor annuity options); and 302 (relating to interest rate assumptions for lump sum distributions).

Significant new rules will affect Roth IRAs, including recharacterizations, rollovers by nonspouse beneficiaries, and required minimum death distributions from Roth IRAs.

Note: IRS Notice 2007-7 provided guidance with respect to certain provisions of PPA that were primarily related to distributions and that were effective beginning in 2007 or earlier.

The IRS web site has a list of frequently asked questions on a waiver of the 60-day rollover requirement. The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 granted the IRS permission to waive the 60-day requirement if no waiver would be against equity or good conscience due to casualty, disaster, or other events beyond the reasonable control of an IRA owner or other individual subject to the 60-day rollover rule.

Individuals who have Economic Stimulus Act payments made by direct deposit to their individual retirement accounts (IRAs), Coverdell education savings accounts (CESAs), or health savings accounts (HSAs) may remove the payments without incurring any adverse tax consequences.

Under IRS Announcement 2008-44, an individual may withdraw an amount no greater than the amount of the directly deposited Economic Stimulus Payment. Withdrawals occuring no later than the taxpayer’s income tax return due date for 2008, plus extensions (for a CESA, the later of May 31, 2009, or the taxpayer’s income tax return due date for 2008, plus extensions), will not be subject to federal income tax nor to any penalty tax.

Financial organizations should report the deposits and distributions in the usual manner. Taxpayers will address the taxation of such distributions on their federal income tax returns.

IRS Notice 2008-30 provides Pension Protection Act (PPA) of 2006 guidance for provisions effective in 2008. The notice addresses PPA sections 824 (relating to rollovers from eligible retirement plans to Roth IRAs); 1004 (relating to additional survivor annuity options); and 302 (relating to interest rate assumptions for lump sum distributions).

Significant new rules will affect Roth IRAs, including recharacterizations, rollovers by nonspouse beneficiaries, and required minimum death distributions from Roth IRAs.

Note: IRS Notice 2007-7 provided guidance with respect to certain provisions of PPA that were primarily related to distributions and that were effective beginning in 2007 or earlier.

Individuals who have Economic Stimulus Act payments made by direct deposit to their individual retirement accounts (IRAs), Coverdell education savings accounts (CESAs), or health savings accounts (HSAs) may remove the payments without incurring any adverse tax consequences.

Under IRS Announcement 2008-44, an individual may withdraw an amount no greater than the amount of the directly deposited Economic Stimulus Payment. Withdrawals occuring no later than the taxpayer’s income tax return due date for 2008, plus extensions (for a CESA, the later of May 31, 2009, or the taxpayer’s income tax return due date for 2008, plus extensions), will not be subject to federal income tax nor to any penalty tax.

Financial organizations should report the deposits and distributions in the usual manner. Taxpayers will address the taxation of such distributions on their federal income tax returns.

Among the changes:  The Form 1099-R and 5498 reporting instructions for 2008 indicate that IRA custodians/trustees should report qualified rollover contributions from eligible retirement plans (other than an IRA) to a Roth IRA as rollovers in Box 2 of Form 5498. This transaction is a provision of the Pension Protection Act of 2006, effective January 1, 2008. 

The 2007 instructions for IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and IRS Form 5498, IRA Contribution Information, are now available for IRA custodians/trustees that want to start updating their data systems. The instructions specifically address IRA custodian/trustee reporting of qualified charitable distributions, qualified HSA funding distributions, catch-up contributions due to employer bankruptcy, and repayment of qualified reservist distributions, all provisions of the Pension Protection Act (PPA) of 2006.

The IRS web site includes a page devoted to IRA-related frequently asked questions. Click here, then click on 17, Individual Retirement Arrangements (IRAs). A key word search is also available.

The Internal Revenue Service today announced tax relief for New Jersey and New York taxpayers in the Presidential Disaster Area that was struck by severe storms and flooding April 14-18, 2007. The disaster area consists of the following counties:

• Bergen, Burlington, Essex, Passaic, Somerset and Union in New Jersey and
• Orange, Rockland and Westchester in New York.

Deadlines for affected taxpayers to file returns, pay taxes and perform other time-sensitive acts falling on or after April 14, 2007 and on or before June 25, 2007 have been postponed to June 25, 2007. This relief includes making contributions to an IRA or HSA for tax year 2006 that were otherwise due to be made on or before April 17, 2007.