Essentials of Roth IRA Contributions

Essentials of Roth IRA Contributions



A Roth IRA is a form of Individual retirement Arrangement (IRA). It has rules that determine eligibility of persons that can use it. A Roth-IRA differs from the traditional IRA in several ways. For one, it has no tax deductions and enjoys benefits that are unique to it. A Roth-IRA gives room to participants to manage the contributions in resourceful ways. This difference includes Contributions. They are run by different hk mpf contribution rules and factors from traditional IRA.

Types of Contributions

There are two categories of contributions: Regular contributions and Rollovers and conversions.

Regular contributions are done in two forms.

Participant contributions: Refers to the contributions by persons categorized as single or heads of households under the Roth IRA tax structure. Some persons contribute the full amount of their compensation depending on where they fall in the tax structure (limits). Persons of 50 years or older by the end of the year covered by the contributions get to contribute an extra catch-up contribution.

Spousal Roth contributions: Refer to contributions made by a person on behalf of his spouse.

Rollovers and conversions include:

Transfers: Refer to the movements of assets between similar retirement plans or between spouses’ Roth-IRA accounts.

Rollovers: Refer to similar movements of assets as in transfers but differs from transfers in the fact that rollovers are reportable to the IRS and IRA owner.

Conversions: Refer to movements of assets from Simple IRA, traditional IRA or SEP IRA to a Roth-IRA. These movements are taxable and are reported to the IRS and IRA owner.

Reconversions: Refers to movement of assets back to a Simple IRA, a traditional IRA or a SEP IRA that had previously been converted to a Roth IRA.

Timing of Contributions

Roth contributions are made anytime in the taxable year. The deadline for making contributions is the due date for filing the income tax returns of the year covered by the contributions.


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