What Is IRS Publication 590: Individual Retirement Arrangements (IRAs)?
Let me explain what IRS Publication 590 is—it's an official IRS document titled 'Individual Retirement Arrangements (IRAs)' that lays out the rules for individual retirement accounts. As someone diving into this, you'll find it covers how to set up an IRA, how to make contributions, the limits on those contributions, how distributions are handled, and how to claim tax deductions for your IRA contributions. It also details the penalties you might face if you don't follow the IRA regulations correctly.
Key Takeaways from IRS Publication 590
You should know that IRS Publication 590 breaks down the tax rules and guidelines for IRAs in a straightforward way. It includes everything from setting up your IRA to contribution limits and beyond. Remember, it's divided into two parts: Part A deals with contributions to these arrangements, and Part B focuses on distributions.
Understanding IRS Publication 590: Individual Retirement Arrangements (IRAs)
When we talk about 'individual retirement arrangements' in IRS Publication 590, understand that this term covers a broad range of options, including individual retirement accounts, annuities, and other trusts or custodial accounts designed as personal savings plans with tax benefits for retirement. The publication is split into two main parts—Part A on contributions and Part B on distributions. You'll notice big differences between accounts like Roth IRAs and traditional IRAs, especially in how contributions are taxed.
Here's what the publication addresses directly to you: who can open a traditional or Roth IRA, when you can open one, the definition of a Roth IRA, steps to open either type, contribution limits, timing for contributions, deduction amounts, rules for inheriting an IRA, moving retirement assets, withdrawal guidelines, and actions that could lead to penalties or extra taxes.
IRS Publication 590: Individual Retirement Arrangements: New Items
I want to point out that IRS Publication 590 regularly introduces new rules or provisions, such as relief for disaster victims. For instance, in the 2017 tax year, it included a qualified disaster tax relief provision allowing tax-favored withdrawals and repayments from retirement plans for those affected by Hurricane Harvey, Hurricanes Irma and Maria, and the California wildfires.
Other updates for 2017 covered treatment of unrelated business income in an IRA, modified AGI limits for traditional IRA contributions, specific AGI limits for certain married individuals, and AGI limits for Roth IRA contributions. Moving to 2018, there were increases in AGI limits overall, an extended rollover period for certain plan loan offsets, and a disclosure that prevents recharacterization of conversions from 2018 onward.
Keep in mind the key differences between retirement accounts in this publication, like Roth and traditional IRAs, particularly regarding tax treatment of contributions.
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