Contributions
This is the only form of money that can be used to make and IRA contribution.
What is cash?
These are funds going out of an IRA.
What are distributions?
These dollars have already been taxed before entering a Roth IRA.
What are after-tax dollars?
These IRAs are not eligible to receive contributions.
What are beneficiary IRAs?
This legal document is required to process divorce‑related IRA transfers.
What is a divorce decree, QDRO, or MSA?
This factor determines whether a person is eligible to make an IRA contribution.
What is earned income?
This term describes a distribution take before age 59.5 that does not meet an IRS exception.
What is a non-qualified distribution?
This term refers to delaying taxes on contributions and earnings until withdrawal.
What is tax-deferred?
This annual date is generally the deadline for making IRA contributions for the prior tax year.
What is April 15th or Tax Day?
This term describes the internal movement of assets between LPL accounts.
A client earned $3200 this year but wants to contribute $6000 to their IRA. This rule limits how much they can contribute.
What is the rule that contributions cannot exceed earned income?
A 35-year-old withdrawals funds from their Traditional IRA for a non-qualified reason. They will owe ordinary income tax and this additional penalty.
What is the 10% early withdrawal penalty?
A Traditional IRA contribution may reduce taxable income—but only if this condition is met.
What is meeting the income and plan‑coverage criteria for deductibility?
A non‑working spouse wants to contribute to their own IRA using their partner’s income. This filing status is required.
What is married filing jointly?
In a divorce, assets must be transferred in specific share amounts—not percentages—due to this rule.
What is LPL’s requirement for share‑specific transfers?
An advisor asks whether a client who participates in an employer retirement plan can still contribute to a Traditional IRA. The contribution is allowed, but this aspect may phase out depending on income.
What is deductibility?
A client wants to take a distribution but doesn't have enough cash available in the IRA to cover their federal and state tax withholding elections. What must happen before the distribution can be processed?
What is liquidating or freeing up enough cash to cover withholding?
An advisor wants to know whether their client should make a Roth or Traditional contribution to minimize taxes this year. What is the correct FSP response?
What is to avoid giving tax advice and recommend the client consult a CPA?
A grandparent wants to put money into their grandchild’s IRA. The grandchild has no earned income. Can the contribution be made?
What is: No, because the IRA owner must have earned income.
A decree states that the ex‑spouse should receive 50% of the IRA. The delivering account does not have enough cash or shares available to complete the transfer. What must happen before journaling?
What is trading or freeing up the necessary cash or shares in the delivering account?
A client wants to contribute directly into a Direct Business account to buy an annuity. Doing this would cause a reporting issue because this type of account does not generate IRS forms. What mistake is the advisor about to make?
What is attempting to contribute directly into a Direct Business account?
A client takes a distribution while temporarily living in Florida. Their mailing address on file still shows Michigan, and they elect state withholding. Which state's withholding will apply, and why can't this be changed after processing?
What is Michigan, because the state withholding is based on mailing addresses and cannot be altered after the transaction?
A client wants the FSP to calculate whether their MAGI qualifies for a deductible contribution. They provide partial income details and ask you to ‘run the numbers.’ What must the FSP do?
What is refrain from calculating or determining MAGI and direct them to consult a CPA?
A client accidentally over‑contributes to their IRA and realizes it after the tax deadline. They ask, ‘Can you just reverse it?’ What must the FSP explain?
What is that excess contributions may require corrective distribution and the client must consult a tax professional for resolution?
An advisor wants to transfer IRA assets to the ex‑spouse using a distribution code instead of a journal because it seems faster. What must the FSP warn them about?
What is: That doing so would create a taxable distribution, not a divorce transfer, and could cause irreversible tax consequences.