In July 2026, an unmarried client, age 39, withdraws $50,000 from a Roth IRA she opened in 2019. Her total regular Roth IRA contributions are $15,000. In 2025 she made a fully taxable $40,000 conversion from a traditional IRA into this Roth IRA, and in January 2026 she made a fully taxable $20,000 conversion. She does not meet any exception to the 10% early-distribution tax.
What amount of the 10% additional tax will she owe on the 2026 withdrawal? Answer: $3,500
Under the Roth IRA ordering rules in IRC § 408A, distributions are treated as coming from regular contributions first, then from conversions on a FIFO basis, then from earnings. The $15,000 of regular contributions is not subject to tax or penalty. The next $35,000 of the $50,000 withdrawal is treated as coming from the 2025 conversion, which is still within its five-year conversion period, so that $35,000 is subject to the 10% additional tax: $3,500. The $4,000 answer penalizes the full $40,000 2025 conversion; the $5,000 answer penalizes the entire distribution; the $0 answer ignores the conversion five-year rule.
Elena, age 52, has 2026 earned income of $160,000 and participates in her employer's 401(k) plan. Her spouse has no earned income and does not participate in any retirement plan. They file a joint return, and their MAGI for IRA purposes is $135,000. For 2026, the regular IRA contribution limit is $7,500, the catch-up limit for taxpayers 50 and older is $1,100, and the traditional IRA deduction phase-out range for married taxpayers covered by an employer plan is $129,000 to $149,000.
Which statement is true about Elena's traditional IRA contribution for 2026? Answer: She may contribute up to $8,600, and the deduction is partially phased out because their MAGI is within the traditional IRA deduction phase-out range.
Governing authority: IRC §§ 219(b) and 219(g). Elena's maximum traditional IRA contribution is $8,600: the $7,500 regular limit plus the $1,100 catch-up for being 50 or older. Because she actively participates in a 401(k) plan and files jointly with MAGI of $135,000, her deduction is in the $129,000-$149,000 phase-out range, so the deductible portion is reduced but not eliminated. The $7,500 option misses the catch-up. The option calling the contribution fully deductible because the phase-out applies only to Roth IRAs confuses the traditional IRA deduction phase-out with the Roth contribution phase-out. The option saying no deduction is allowed for 401(k) participants is wrong: active participation triggers the phase-out, not a complete bar on deductibility.
A 45-year-old client takes a $30,000 distribution from a traditional IRA in 2026. She uses $25,000 toward the purchase of her first home and $5,000 for her daughter's qualified college tuition. She has never used the first-home exception. No early-distribution exception other than the first-home and higher-education exceptions applies to this distribution.
What amount of the 10% early-distribution tax will she owe? Answer: $1,500
Under IRC § 72(t), the 10% early-distribution tax applies to distributions before age 59½ unless an exception applies. The first-time homebuyer exception is limited to $10,000 over a lifetime, so only $10,000 of the $25,000 home purchase is protected. The $5,000 tuition payment qualifies for the higher-education exception. Therefore, $15,000 of the $30,000 distribution is subject to the 10% tax, producing $1,500. The $3,000 answer ignores both exceptions; the $2,000 answer applies the homebuyer cap but ignores the tuition exception; the $0 answer treats the entire home purchase and the tuition payment as excepted.
A single client, age 48, has modified adjusted gross income for Roth IRA purposes of $160,000 and earned income of $80,000. He has no other IRAs. For 2026, the regular Roth IRA contribution limit is $7,500, and the phase-out range for a single taxpayer is $153,000 to $168,000. He wants to make the maximum regular contribution to a Roth IRA for 2026.
What is the maximum regular Roth IRA contribution he may make for 2026? Answer: $4,000
Under IRC § 408A(c)(3), the regular Roth IRA contribution limit is reduced when modified adjusted gross income is within the applicable phase-out range. For 2026, the limit is $7,500 and the single phase-out range is $153,000-$168,000. A MAGI of $160,000 is $7,000 into the $15,000 range, so $3,500 of the limit is phased out ($7,500 × 7/15). The remaining maximum regular Roth IRA contribution is $4,000. Age 48 means no catch-up contribution applies, and earned income of $80,000 is more than the contribution limit. The $7,500 answer ignores the phase-out; the $3,500 answer is the phased-out amount rather than the remaining limit; the $0 answer would apply only if MAGI were at or above the top of the phase-out range.
Ben, age 45, takes a $24,000 distribution from his traditional IRA in 2026 to buy his first principal residence. His traditional IRA contains only deductible contributions. He meets the first-time homebuyer definition, has not previously used any portion of the first-time homebuyer exception, and uses the entire distribution within 120 days toward the purchase. The first-time homebuyer exception to the 10% additional tax has a $10,000 lifetime limit.
Which statement correctly describes the federal income tax treatment of this distribution? Answer: The full $24,000 is included in gross income; $10,000 is exempt from the 10% additional tax, and the remaining $14,000 is subject to a $1,400 additional tax.
Governing authority: IRC § 408(d) and § 72(t)(8). Because the IRA contains only deductible contributions, the entire $24,000 distribution is included in gross income. The first-time homebuyer provision is an exception only to the 10% additional tax, not an exclusion from income. Because Ben has not previously used any of the $10,000 lifetime exception, $10,000 of the distribution is not subject to the 10% additional tax, and the remaining $14,000 is subject to an additional tax of $1,400 (10% of $14,000). The statement excluding the entire distribution from gross income is wrong because a first-home purchase does not make a traditional IRA distribution tax-free. The statement excluding the first $10,000 from gross income also treats a penalty exception as an income exclusion. The statement imposing $2,400 on the full distribution ignores the $10,000 exception available here.
In 2026, a 75-year-old client has $30,000 of wages from part-time work and receives a $12,000 required minimum distribution (RMD) from a traditional IRA. For 2026, the regular traditional IRA contribution limit is $7,500, and the catch-up contribution limit for taxpayers age 50 or older is $1,100. He wants to contribute the maximum amount to a traditional IRA for 2026.
What is the maximum contribution he may make to a traditional IRA for 2026? Answer: $8,600, because his wages cover the regular limit and the $1,100 catch-up applies
Under IRC § 219, a traditional IRA contribution is limited to the lesser of taxable compensation and the sum of the regular limit plus any applicable catch-up. The SECURE Act eliminated the former prohibition on contributing after age 70½, so taking RMDs does not bar a 2026 contribution. For 2026, the regular limit is $7,500 and the catch-up is $1,100, for a total of $8,600, and his $30,000 of wages covers that amount. The $12,000 RMD is not compensation for IRA contribution purposes. The $7,500 answer omits the catch-up; the $42,000 answer treats the RMD as compensation and ignores the dollar cap; the $0 answer reflects the former pre-SECURE Act age restriction.
Owen turned 73 on September 14, 2026. He is still employed and participates in his employer's 401(k) plan; he is not a 5% owner. He also owns a traditional IRA.
Under the required minimum distribution rules, which statement is true for a participant who has attained age 73, is not a 5% owner, remains employed by the employer maintaining the participant's 401(k) plan, and also owns a traditional IRA? Answer: The traditional IRA RMD must be taken by April 1 of the year after the participant reaches age 73, while the 401(k) plan RMD may be delayed until April 1 of the year after retirement.
Governing authority: IRC § 408(a)(6), applying § 401(a)(9). For a traditional IRA, the required beginning date is April 1 of the year after the owner attains the applicable RMD age, which is 73 here; the still-working exception does not apply to IRAs. For an employer plan, the required beginning date is April 1 of the year after the later of the year the employee reaches age 73 or the year the employee retires, provided the employee is not a 5% owner. Thus the participant may delay the 401(k) plan RMD until after retirement but must take the traditional IRA RMD for the year in which the participant reaches age 73 by April 1 of the following year. If that extension is used, the following year's IRA RMD remains due by December 31. The statement that both RMDs are due by December 31 ignores the April 1 first-RMD deadline and the still-working exception. The statement that both may be delayed until retirement wrongly extends the plan exception to an IRA. The statement that the 401(k) RMD is due by December 31 while the IRA may be delayed reverses the two rules.
A married couple, both age 52, file a joint return. The wife earns $140,000 in wages and participates in a 401(k) plan. The husband has no earned income and does not participate in any employer plan. Their modified adjusted gross income for IRA purposes is $260,000, and neither has made an IRA contribution for 2026.
Which statement about traditional IRA contributions for 2026 is correct? Answer: Each spouse may contribute $8,600, but neither contribution is deductible because the couple's MAGI exceeds the applicable phase-out ranges.
Under IRC § 408 and § 219, spousal IRA rules allow a nonworking spouse to contribute based on the working spouse's compensation, and each spouse age 50 or older may contribute $8,600 for 2026 ($7,500 regular plus $1,100 catch-up). Deductibility is phased out for the wife because she is covered by a workplace plan and the couple's MAGI exceeds the $129,000-$149,000 range; the husband, as a noncovered spouse with a covered spouse, has a $242,000-$252,000 phase-out, which the $260,000 MAGI also exceeds. Thus neither contribution is deductible. The statement that only the wife may contribute ignores the spousal IRA rule; the statement that the husband may deduct ignores the noncovered-spouse phase-out; the $7,500 statement omits the catch-up contribution.
A client, age 45, has two traditional IRAs. In March 2026, he took a distribution from IRA 1 and deposited the full amount into a new traditional IRA 40 days later. In November 2026, he took a distribution from IRA 2 and deposited the full amount into the same new IRA 45 days later. The IRS has not granted a waiver.
Which statement is correct about the November 2026 distribution and rollover? Answer: The November distribution is taxable, and because the client is under age 59½, it is also subject to the 10% early-distribution tax.
Under IRC § 408(d)(3), a taxpayer may make only one tax-free 60-day traditional IRA-to-traditional IRA rollover in any 12-month period, and that limit is applied across all of the client's traditional IRAs rather than separately to each IRA. The March 2026 rollover used that one-per-year allowance, so the November distribution does not qualify for tax-free rollover treatment even though it was deposited within 60 days. It is therefore includible in income, and because the client is under age 59½ and no exception applies, it is also subject to the 10% early-distribution tax. Depositing the funds into an IRA does not by itself avoid that tax. A direct trustee-to-trustee transfer would not count against the once-per-year limit, but this scenario involved 60-day rollovers.
Grace, age 41, opened her first Roth IRA in 2018 and has made only regular contributions totaling $40,000. In 2025, she converted $60,000 from a traditional IRA to the same Roth IRA. The conversion was fully taxable, and she reported it on her 2025 return. In 2026, she withdraws $70,000 from the Roth IRA for a nonqualified purpose.
How is the 2026 withdrawal treated for federal income tax purposes? Answer: The $40,000 of regular contributions is tax-free and penalty-free; the $30,000 conversion amount is not subject to income tax but is subject to a $3,000 additional tax.
Governing authority: IRC § 408A(d). For a nonqualified Roth IRA distribution, regular contributions are distributed first, then conversion contributions, then earnings. Grace's $40,000 of regular contributions is already taxed basis and is neither taxable nor penalized. Of the remaining $30,000, the conversion amount was taxed at conversion, so it is not taxable again, but because Grace is under age 59½ and the withdrawal occurs within the five-tax-year period beginning with the 2025 conversion, the $30,000 is subject to the 10% early distribution tax: $3,000. The option treating the entire distribution as tax-free and penalty-free confuses the general five-year qualified distribution rule with the separate conversion recapture period and ignores her age. The option taxing the conversion amount again double-taxes amounts already included in income. The option taxing the entire distribution ignores the ordering rules for Roth IRA distributions.
A single client, age 48, participates in a 401(k) plan at work. For 2026, her modified adjusted gross income for IRA purposes is $85,000. The 2026 traditional IRA deduction phase-out range for a single taxpayer covered by an employer plan is $81,000 to $91,000. She contributes the full $7,500 to a traditional IRA.
What amount of her 2026 traditional IRA contribution is deductible? Answer: $4,500
Under IRC § 219(g), using the phase-out range stated in the stem, a single taxpayer covered by a workplace plan loses 40% of the deduction because her MAGI is $4,000 into the $10,000 phase-out range. She may deduct 60% of the $7,500 contribution, or $4,500; the remaining $3,000 may be treated as a nondeductible contribution. The $7,500 answer ignores the phase-out; the $3,500 answer subtracts the $4,000 MAGI excess dollar-for-dollar instead of applying the proportional phase-out; the $0 answer treats the contribution as fully nondeductible.
A single client, age 50, has a traditional IRA with a pre-tax balance of $22,500 consisting of a rollover from a former employer's 401(k) plan. Because her income exceeds the Roth IRA contribution phase-out, she makes a $7,500 nondeductible traditional IRA contribution for 2026 and then converts $7,500 from the traditional IRA to a Roth IRA. Immediately before the conversion, her total traditional IRA balance is $30,000, which includes the nondeductible contribution. She has no other traditional, SEP, or SIMPLE IRAs.
What amount of the $7,500 conversion is taxable in 2026? Answer: $5,625
Under the Roth conversion and IRA aggregation rules of IRC § 408A and § 408, a conversion from a traditional IRA with both pre-tax and after-tax amounts is taxable proportionally, not by tracing the converted dollars to the nondeductible contribution. The client's basis is $7,500 out of a total $30,000 traditional IRA balance, so 25% of the conversion is nontaxable and 75% is taxable. Therefore, 75% of $7,500, or $5,625, is taxable. The $0 answer treats the conversion as if it came entirely from the nondeductible contribution; the $7,500 answer ignores the basis entirely; the $1,875 answer uses the 25% nontaxable percentage as the taxable percentage.
A client turns 73 on November 3, 2026. He owns a traditional IRA and a Roth IRA. He continues to work full time in 2026 and 2027 and is not a 5% owner of his employer. He asks about required minimum distributions from these IRAs.
Which statement is correct? Answer: The first traditional IRA RMD is due by April 1, 2027, the 2027 RMD by December 31, 2027, and the Roth IRA has no lifetime RMD.
Under IRC § 408(a)(6), applying § 401(a)(9), the first traditional IRA RMD is due by April 1 of the year after the owner reaches age 73. If that first RMD is delayed until April 1, 2027, the 2027 traditional IRA RMD is still due by December 31, 2027. The still-working exception applies to certain employer plans, not to IRAs, so continued employment does not delay the IRA RMD. Under IRC § 408A, Roth IRAs have no required minimum distributions during the owner's lifetime.
Yolanda, age 74, has already begun taking RMDs from her traditional IRA. In 2026, she has $8,000 of net self-employment income and is not covered by any employer retirement plan. For 2026, the regular IRA contribution limit is $7,500 and the catch-up limit for taxpayers 50 and older is $1,100.
Which statement is true about Yolanda's traditional IRA contribution for 2026? Answer: She may contribute up to $8,000 to a traditional IRA, and the contribution is fully deductible because she has compensation.
Governing authority: IRC §§ 219(b) and 408. The SECURE Act removed the old rule that barred traditional IRA contributions after age 70 1/2, so Yolanda may contribute even though she is 74 and already taking RMDs, as long as she has taxable compensation. Total IRA contributions cannot exceed the lesser of the contribution/catch-up limit, $8,600, or her compensation, $8,000, so her maximum is $8,000. Because she is not covered by an employer plan, the contribution is fully deductible. The $8,600 option ignores the compensation limit. The no-deduction option reflects the repealed pre-SECURE Act rule. The option denying any contribution because RMDs have begun is also wrong; RMDs do not make a person ineligible to contribute from current earned income.
