Remedying Common IRA Contribution and Withdrawal Errors to Avoid IRS Penalties and Plan Disqualification

Excess Contributions, Prohibited Transactions, Forgotten RMDs, Form 5329 Penalty Waiver or Exception

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, June 20, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will address the best steps tax practitioners and taxpayers can take to remedy the most frequent IRA contribution and withdrawal errors. IRA rules provide countless opportunities for missteps and taxpayers regularly stumble on these. Our panel will detail how to resolve the most common of these, including correcting excess contributions, missing the 60-day rollover window, failing to take an RMD at 70 years and six months or death, and others. They will also cover preparation of Form 5329 to report, provide an exception or waive a retirement plan penalty.

Description

The most frequent IRA error is likely the dreaded over-contribution which can happen in a multitude of ways. The taxpayer may exceed the annual maximum ($6,000 for 2019; plus the $1,000 age 50 catch-up), roll in an ineligible contribution, make a contribution after the 60-day replacement window has passed, or contribute to an IRA though the taxpayer is ineligible. In these cases, if the excess isn't withdrawn by the tax filing deadline, the 6% excess contribution penalty is assessed on the excess and its relative earnings, until withdrawn, which can significantly deplete the retirement account.

Another common error with severe consequences is the missed RMD distribution which carries a hefty 50% excess accumulation penalty that compounds each year an RMD isn't taken. Not as common but still egregious are prohibited transactions, pledged IRAs, failed conversions and other transactions that jeopardize the non-taxable nature of these retirement accounts.

In addition to mistakes, there are intentional early distributions. These are subject to an early withdrawal penalty of 10% with certain exceptions, including age, medical expenses, first-time home buyer, payments spread under 72(t) and more. Each of these exceptions has its own set of qualifications to avoid the penalty.

Listen as our panel of experts walk you through how to handle taxpayer IRA snafus, the resulting penalties and perhaps avoid the penalties entirely.

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Outline

  1. IRA eligibility and types of IRAs
  2. Handling IRA contribution errors for
    1. Excess contributions
    2. Roth vs. IRA contributions
    3. Ineligible contributions
  3. Handling IRA distribution errors for
    1. RMDs
    2. Pledged IRAs
    3. Beneficiaries
    4. Prohibited transactions
  4. Negating penalties
    1. Avoiding the 10% early withdrawal penalty
    2. Applying for the forgotten RMD waiver

Benefits

The panel will review these and other important issues:

  • Handling over-contributions to IRA accounts
  • Avoiding IRA account penalties
  • Preparing Form 5329 for penalty exceptions and penalty waivers
  • Identifying and handling prohibited transactions
  • Properly making Roth IRA conversions

Faculty

Cheng, Marguerita
Marguerita M. Cheng

Chief Executive Officer
Blue Ocean Global Wealth

Prior to co-founding Blue Ocean Global Wealth, Ms. Cheng was a financial advisor at Ameriprise Financial and an analyst...  |  Read More

Downing, Jake
Jake R. Downing

Partner
Seyfarth Shaw

Mr. Downing is experienced in counseling clients on qualified and nonqualified retirement and welfare plan matters...  |  Read More

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