Q. Are my contributions deductible?

A. Traditional IRA contributions may be deductible, the allowable deduction will depend on your tax filing status, income level and whether you are a participant in an employer sponsored retirement plan.

Roth IRA contributions are always non-deductible.


Q. May I contribute to a Traditional IRA and a Roth IRA in the same year?

A. You may contribute to both types of IRAs in the same year, however, the combined dollar amount cannot exceed the contribution limit or 100% of your earned income, whichever is less.


Q. Is there an age limit for making contributions to my IRA?

A. Contributions can be made to a Traditional IRA only until the year in which you attain age 70 1/2. There are no age limits on a Roth IRA as long as you have earned income.


Q. Will I be penalized by the IRS for my IRA distributions?

A. Unless an exception applies, a 10% early withdrawal penalty may be applied to distributions from either a Traditional IRA or a Roth IRA before age 59 1/2.


Q. Is there a contribution deadline for funding an IRA?

A. For a Traditional, Roth or a CESA, accounts can be opened and or funded any time between the first day of a tax year and the date a tax return is due, excluding extensions. For most taxpayers, this due date is April 15th of the following year.

For a SEP Plan, the deadline is your business's tax-filing deadline, including extensions.


Q. When must I withdraw funds from my Traditional/SEP/Roth IRA?

A. On a Traditional IRA and a SEP IRA, when you reach age 70 1/2 you must take a required minimum distribution each year or penalty taxes will apply.

You never have to take distributions on your Roth IRA.


Q. What is a Coverdell Education Savings Account (CESA)?

A. The Coverdell Education Savings Account is a non-deductible account that features tax free withdrawals for a child’s education expenses.


Q. How does the law define a child?

A. A child is defined as a person who is under the age of 18. The child's eligibility for CESA contributions ends the day after the child attains age 18. Children with special needs are not subject to this restriction.


Q. Who has control of the assets?

A. Each CESA has a responsible individual, usually a parent or legal guardian. That individual has control of the assets until the child reaches the age of majority.


Q. How much can I contribute?

A. The total aggregate contribution into one or more CESAs on behalf of a child is $2,000 a year.


Q. What is a Simplified Employee Pension Plan(SEP)?

A. A Simplified Employee Pension is a retirement plan established by an employer, whether incorporated or not. Sole proprietors and partnerships can have SEPs. However, if you currently maintain a qualified retirement plan, you cannot establish an Internal Revenue Service model SEP plan for your business.


Q. What amount gets contributed to a SEP?

A. Each year, the employer can contribute a certain percentage of each eligible employee's compensation. The contribution percentage may vary from year to year and there is no obligation to make a contribution in any given year. However, if the employer is going to make a contribution, each employee must get the same percentage.


Q. How much can I contribute to my Traditonal/Roth IRA?

A. You may contribute any amount up to 100% of your compensation or the maximum contribution limit, whichever is less. If you have attained the age of 50 you can make a "catch-up" contribution.

Tax Year 2002-2004 2005-2007 2008 2009 and thereafter

Contribution Limit $3,000 $4,000 $5,000 $5,000 + cost of living adjustment

Tax Year 2002-2005 2006 and thereafter

Catch-up Amount $ 500 $1,000