Q&A Frequently Asked IRA Questions
General Information
What is an IRA?
Is there a minimum age requirement to
open an IRA?
What types of IRAs does the Credit
Union offer?
What type of IRA savings choices does
the Credit Union offer?
If I am interested in other types of
investments for my IRA, can the Credit
Union help me?
What is the deadline for members to
make contributions to their IRA and/or
ESA for tax year 2011?
How much can I contribute to a
Traditional or Roth IRA for the previous
year (2011)?
How much can I contribute to a
Traditional or Roth IRA for the current
year 2012?
What is the difference between a
Traditional and Roth IRA?
If I already have a Roth IRA, can I have
a Traditional IRA too?
Can you convert funds in a Traditional
IRA to a Roth IRA?
If I contribute to a Coverdell ESA, can I
still contribute to a Traditional or Roth
IRA?
Can I roll funds from a Traditional or
Roth IRA into a Coverdell ESA?
Can I roll funds from my IRA Savings
into a Health Savings Account (HSA)?
What type of IRA will accept my
Qualifed Retirement Plan Funds?
Does NCUA provide Insurance coverage
for Traditional and Roth IRA's?
Tax Information
When will I receive a 1099-R Tax Form?
When will I receive a 1099-Q Tax Form?
When will I receive a 5498 Tax Form?
When will I receive a 5498-Q Tax Form?
If I completed a rollover from my other
financial institution to Elevations Credit
Union, will I receive a 1099-R/1099-Q
Tax Form(s) from Elevations Credit
Union?
How can I pay my Business taxes?
Traditional IRA
Is my Traditional IRA contribution
deductible on my federal income tax
return?
Will I owe income taxes when I
withdraw from my Traditional IRA?
When must I begin taking distributions
from my Traditional IRA?
If I make an early withdrawal from my
Traditional IRA, (before age 59 1/2), do I
pay an IRS penalty?
Can I waive my 2012 RMD?
Roth IRA
Who can contribute to a Roth IRA for
2012?
Who can contibute to a Roth IRA for
2011?
Are contributions to a Roth IRA tax
deductible?
Is there an age at which I can no longer
contribute to my Roth IRA?
Do I have to take minimum distributions
from a Roth IRA when I reach age 70
1/2?
When can I start taking tax-free
distributions from my Roth IRA?
Coverdell Education
Savings Account (ESA)
Describe the individual roles involved in
a Coverdell Education Savings Account
(ESA).
How much can I contribute to a
Coverdell ESA for the year 2011 or
2012?
Are contributions to a Coverdell ESA
tax deductible?
Who can contribute to a Coverdell ESA?
If I contribute to a Coverdell ESA, can I
still contribute to a Traditional or Roth
IRA?
Can I roll funds from a Coverdell ESA
into either a Traditional or Roth IRA?
How long can I contribute to the
Coverdell ESA?
When can distributions begin from a
Coverdell ESA?
What educational expenses are
considered "qualified educational
expenses"?
Does NCUA provide Insurance coverage
for Coverdell ESA's?
Simplified Employee
Pension Plan (SEP)
What is a Simplified Employee Pension
Plan (SEP)?
Does the Credit Union offer IRAs that
accept SEP contributions?
How much can be contributed to a SEP
Plan for the year 2012?
Are SEP Plan contributions tax
deductible?
Can prior-year contributions to a SEP
Plan be made?
How long can SEP Plan contributions be
made?
How are SEP contributions taxed?
Are minimum distributions required on
a SEP Plan?
Does NCUA provide Insurance coverage
for SEP IRA's?
Q&A Frequently Asked IRA Questions
IRA stands for Individual Retirement Account. An IRA is one type of specific retirement account,
allowed by the IRS, to provide either tax-advantage or tax deferral benefits.
No, there are no minimum age requirements to open an IRA; however, earned income is a requirement to
open a Traditional or Roth IRA (see www.IRS.gov for additional information)
The Credit Union offers Traditional IRAs, Roth IRAs, Coverdell Education Savings Accounts (ESA)
and Traditional IRAs that accept Simplied Employee Pension Plan (SEP) funds.
The Credit Union offers IRA Savings Accounts and IRA Certificates (3-60 month terms). Refer to
elevationscu.com for all current rates and product offerings.
The Credit Union offers Investments and retirement planning with our Wealth Management team. No-
cost, no-obligation initial consultation with a financial advisor. Investments in a broad selection of
mutual funds, stocks, bonds and other securities. Management of retirement plans, 401(k) rollovers,
wills and trusts. Contact the Wealth Management team at 303.443.4672 ext 2240.
Regular contributions to Traditional and Roth IRAs and Coverdell ESAs can be made through April 16,
2012, including tax filing extensions.
Contribution limits for previous year (2011) for Traditional and Roth IRAs are 100% of earned income
up to $5,000 for individuals under age 50, and $6,000 for individuals age 50 and older.
Contribution limits for current year (2011) for Traditional and Roth IRAs are 100% of earned income up
to $5,000 for individuals under age 50, and $6,000 for individuals age 50 and older.
Unlike Traditional IRAs, Roth IRAs are never tax deductible. Regular Contributions can be withdrawn
tax and penalty free at any time with a Roth IRA (certain IRS requirements apply).
Yes, the limits on annual contributions apply to any combination of Traditional and Roth IRA
contributions that you make for the year.
Yes, but you will be taxed on the amount that you convert from a Traditional IRA to a Roth IRA. With
the removal of the $100,000 income restrictions all taxpayers will be able to move their Traditional IRA
into a Roth IRA. The law provided a special tax rule for 2011 conversions. You have the option to pay
the entire tax for 2011, or spread the taxation over 2012.. Contact the Wealth Management team at
303.443.4672 ext 2240.
Yes, contributions to Traditional or Roth IRAs do not effect the contributions you can make to a
Coverdell ESA.
No, rollovers from a Traditional or Roth IRA into a Coverdell ESA are not allowed.
Yes, a one-time contribution to an HSA of amounts distributed from an IRA is permitted. Some
restrictions apply.
Qualifed Retirement Plan Funds can be deposited into a Traditional IRA Account or a Roth IRA
Account.
IRA accounts are insured separately to $250,000 from other accounts that the member maintains in the
same credit union. The funds in all IRAs are aggregated with other IRAs of the owner and insured up to
$250,000. This has been extended to 2013.
The 1099-R Tax Form for all withdrawals from Traditional IRAs (including SEP plans) and Roth IRAs
are mailed at the end of January.
The 1099-Q Tax Form for all withdrawals from Coverdell ESAs are mailed at the end of January.
The 5498 Tax Form for all contributions to Traditional IRAs (including SEP plans) and Roth IRAs are
mailed in May.
The 5498-Q Tax Form for all contributions to a Coverdell ESAs are mailed in May.
No. In this situation, the other financial institution will provide you with the 1099-R/1099-Q Tax
Form(s). You may receive 1099-R/1099-Q Tax Form(s) for other withdrawals made from your IRA at
Elevations Credit Union.
A free service provided by the U.S. Department of the Treasury, Electronic Federal Tax Payment
System (EFTPS) allows all federal tax payments to be made electronically. This includes corporate,
excise and employment taxes, and 1040 quarterly estimated tax payments.
Contributions may be deductible based on your retirement plan coverage, filing status and income. To be
sure, it is best to consult a tax advisor.
Yes, in most cases you will owe income taxes when you withdraw from your Traditional IRA. If you
make nondeductible contributions to a Traditional IRA, a portion of each withdrawal will be treated as
the nontaxable return of these contributions.
You must begin taking RMD (Required Minimum Distributions) from your Traditional IRA the year in
which you reach age 70 1/2. The RMD amount each year will be computed using an IRS formula. You
can no longer make contributions to a Traditional IRA in the year you reach age 70 1/2.
In most cases, you will pay a 10% IRS penalty on early distributions before age 59 1/2. The early
distribution penalty does not apply in certain situations, including first-time home purchase, qualified
educational expenses, etc.
No. The waiving of your RMD was only for 2009.
Anyone with earned income (MAGI) up to $110,000 for individual filers, (phase out between $110,000 -
$125,000) and $173,000 for married couples filing jointly, (phase out between $173,000 and $183,000)
can contribute.
Anyone with earned income (MAGI) up to $107,000 for individual filers, (phase out between $107,000
and $122,500) and $169,000 for married couples filing jointly, (phase out between $169,000 and
$179,000) can contribute.
No. Roth IRA contributions are not tax-deductible.
No. You can continue to make contributions to a Roth IRA as long as you have earned income.
No. There are no required distributions.
Regular Contributions can be withdrawn tax-free and without an IRS penalty at any time. There are two
requirements to qualify for tax-free withdrawals of income on a Roth:
1. Five-Year Test must be met. (Must be five years after the first year for which Roth Contributions
were made). 2.
One of the following conditions must apply:
-You are over age 59 1/2.
-Funds are going to your beneficiary upon your death.
-You are using the funds for a first-time home purchase.
-You have become disabled.
Grantor: Person who initially sets up the Coverdell ESA.
Designated Beneficiary: Child for whom the ESA is being established.
Responsible Individual: Parent or Legal Guardian of Designated Beneficiary.
Contributor: Individual who makes contributions to the ESA.
The Contribution limit is $2,000 per child, per year. Contributions for the 2011 year can be made
through April 16, 2012.
No. Coverdell ESA contributions are not tax-deductible.
Anyone with earned income (MAGI) up to $95,000 for individual filers and $190,000 for joint income
filers can contribute the maximum allowable amount to a Coverdell ESA. Phase out for individual filers
is between $95,000 and $110,000. Phase out for joint filers is between $190,000 and $220,000.
Contributions to Traditional or Roth IRAs do not effect the contributions you can make to a Coverdell
ESA.
No, rollovers from a Coverdell ESA are not allowed into a Traditional or Roth IRA.
Contributions can be made to a child's Coverdell ESA until he or she reaches the age of 18. This age
limit does not apply to special needs beneficiaries.
The Responsible Individual can withdrawal funds at any time. To avoid tax conquences, the funds must
be used to pay for child's (ESA Beneficiary) qualified education expenses before they reach the age of
30, (not applicable for special needs beneficiaries).
Qualified expenses may include: tuition, fees, books, computer equipment, or technology required for
elementary, secondary, and post-secondary education.
Coverdell Education Saving Accounts, formerly education IRAs, are insured as irrevocable trust
accounts and will be added to a member’s other irrevocable trust accounts and insured up to $250,000.
This has been extended to 2013.
SEP Plans were created to allow self-employed persons, sole proprietorships, partnerships, small
busineses, small employee groups, and corporations to provide retirement plans via an easily established
and maintained retirement program.
Yes, the Credit Union offers Traditional IRAs that accept SEP Contributions. SEP Plans that are held in
Traditional IRAs follow similar IRS rules to Traditional IRAs. Regular Contributions can be made in
addition to SEP Contributions, as long as the funds are kept separate.
Up to 25% of your salary can be contributed to a SEP Plan (up to a maximum of $50,000). Certain IRS
requirements apply.
Generally, if they were made by your employer, you cannot deduct these contributions. If you made the
contributions as a self-employed person they may be deductible. Consult a tax advisor.
Prior year contributions cannot be accepted for SEP accounts; however , if these contributions are
processed as a current year contribution, the member can speak with their tax advisor to inform them
that the contribution was for the prior-year and the tax advisor can make this change.
SEP Plan contributions can be made until the employee retires, regardless of age.
SEP Plan contributions, made by an employer, are not included in the employee's income for tax
purposes, and an employee does not pay taxes on the balance in their SEP account(s) until the funds are
withdrawn.
Yes. Distributions are required the year in which you reach the age of 70 1/2.
SEP IRA's are coverered by the same Insurance rules as IRA's.