Can I transfer IRA or other retirement plan assets?
Yes, you can transfer assets from trustee-to-trustee or as a rollover. Refer to the Understanding IRA Rollovers topic on the IB Knowledge Base for more information.
Can I open an IRA margin account at IB?
Yes, an IRA margin account allows you to immediately trade on your proceeds rather than waiting for your proceeds to settle, trade assets in multiple currencies and trade limited option spread combinations. IRA margin accounts have certain restrictions compared to regular margin accounts and borrowing is never allowed in this account. You may also upgrade an IRA Cash Account in Account Management on the Trading Configuration page, available in the Trading Access menu. Refer to the Reg T IRA section under the Account Types tab of the Trading Configuration page and the US Stock and Index Options tab under the Margin page on IB’s website for more information. You may also upgrade an IRA Cash Account on the Trading Configuration page in Account Management.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Tax Reporting: IRA Reconversion
A reconversion is a second conversion (following a recharacterization) from a non-Roth IRA to a Roth IRA. In a reconversion, the taxpayer has already made a first conversion from a non-Roth to a Roth IRA and then recharacterized the conversion amount (including net earnings) back to a non-Roth IRA. You may not convert, recharacterize and then reconvert in the same tax year. 1099-R reporting is required for the distribution from the non-Roth IRA and Form 5498 for the contribution to the Roth IRA. Refer to IRS Publication 590 and consult your tax advisor about your individual tax situation.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Tax Reporting: State Withholding on IRA Conversions
If federal income tax withholding is applied to your conversion, state income tax may also apply. If a minimum percentage amount applies, withholding will be set at the greater of the minimum state tax or the amount you specify. Depending upon the state you live in, state income tax withholding may be required. You may also elect not to have state tax withholding apply or you may elect to increase the rate of state withholding above your state’s minimum percentage amount. Consult your tax advisor.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Tax Reporting: Federal Income Tax Withholding on IRA Conversions
An IRA conversion to a Roth is subject to federal income tax withholding at a minimum rate of 10%, unless you elect not to have income tax withholding apply or if you choose another tax withholding rate to apply to the distribution. Consult your tax advisor.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Am I eligible to convert my IRA?
You are eligible to convert to a Roth IRA if your modified AGI for the year that you convert does not exceed $100,000. Individuals who are married filing separate returns are eligible only if they live apart for the full year. For 2010, the IRS has eliminated these requirements and added the option to split the conversion income (and the tax due) over two years with half reported in 2011 and in 2012, unless you elect to report the full amount in 2010. We strongly suggest you consult your tax advisor before you convert an IRA.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Tax: Understanding IRA Conversions
An IRA Conversion is the transfer of funds from an eligible retirement plan (i.e., Traditional IRA, SEP, qualified plan assets including 401(k) and 403(b) plans) to a Roth IRA. The funds may be received under the same trustee or custodian, trustee-to-trustee or by rollover within the 60-day window allowed for rollovers.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Are distributions from a Traditional IRA taxable?
Yes, generally IRA distributions from a Traditional IRA are taxable in the year you withdraw them. Further, distributions from Traditional IRAs that you include in income are taxed as ordinary income subject to regular income tax rates. Distributions may also be fully or partially taxable depending on whether your IRA includes any nondeductible contributions. Refer to IRS Publication 590 and the Instructions to IRS Form 8606, Nondeductible IRAs for further information on whether distributions are taxable.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Can I contribute to both a Traditional and Roth IRA?
Yes, but the combined contribution limit is the same as the contribution limits that apply for both Traditional and Roth IRAs. Your total contribution limit cannot exceed your contribution limit for the year, including any catch-up contributions. However, if your MAGI is above a certain amount the contribution limit for a Roth IRA may be reduced.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
Can I have a joint IRA account?
No, joint IRAs are not permitted. An IRA must be established in the name of the owner with their own tax identification number. An IRA is an “individual” retirement plan which allows the designation of beneficiaries, spouse or a non-spouse.
IRS Circular 230 Notice: The information contained in this FAQ is provided for information purposes only, is not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations and does not resolve any tax issues in your favor. Refer to IRS Publication 590, Individual Retirement Accounts for additional information on IRAs in general and consult your tax advisor about your individual tax situation.
