AFSP Course Library

2 hours
Certificate CTEC IRS NASBA

Tax Treatment of Individual Retirement Arrangements

Course Description:

Federal tax policy is designed to accomplish numerous goals, from funding government to encouraging socially-beneficial actions such as saving for retirement. ERISA, the Employee Retirement Income Security Act, was created principally to meet the latter objective.

ERISA created an individual retirement arrangement-usually referred to simply as an IRA-to encourage taxpayers who were not participants in an employer-sponsored qualified retirement plan to save money to fund their future retirement needs. That was the initial legislative action. In order to participate, you needed to be employed and not a part of a pension, profit-sharing or other qualified plan.

These early ERISA provisions offering tax benefits to individuals funding IRAs have been extended in subsequent legislative actions to:

  • Unemployed spouses;
  • Qualified retirement plan participants; and
  • Taxpayers preferring tax-free distributions instead of deductible contributions.

Early expansion of the IRA provisions added a spousal IRA that is designed to provide retirement assistance to uncompensated homemakers. It was also expanded to allow employees who are covered under an employer-sponsored qualified pension or profit-sharing plan to contribute to an IRA.

Since that earlier ERISA expansion related to IRAs, new IRAs have been added, including Roth IRAs that offer tax-free qualified distributions rather than deductible contributions. In order to differentiate the newer Roth IRA from its earlier cousin, the original IRA is now referred to as a "traditional" IRA.

Learning Objectives:

Upon completion of this course, you should be able to:

  • Discuss the rules governing eligibility and permitted contribution levels applicable to traditional and Roth IRAs;
  • Identify the requirements and benefits related to a spousal IRA;
  • Explain the tax treatment of contributions to and distributions from traditional and Roth IRAs;
  • Describe the benefits of tax-deferred accumulation; and
  • Discuss traditional and Roth IRA distribution rules.

Field of Study: Tax
Course Level: Basic
Prerequisite: None
Delivery Method: QAS / Self Study
Duration: 100 Minutes
Expiration: In accordance with NASBA standards, access to this course will terminate one year from the date of purchase. Incomplete courses will no longer be accessible beyond the one year deadline.