IRS Form 1040 Instructions:
The IRS Form 1040 instructions are very simple and straightforward. They do not contain any complicated jargon or complex calculations. However, they do require some basic math skills to understand them.
If you have no idea what I mean, then please read my previous post: How To Calculate Your Federal Income Taxes For 2014?
. You will get a better understanding of how the numbers work with your tax return.
What Is An IRAs?
An Individual Retirement Account (IRA) is a type of retirement savings account offered by most financial institutions. IRA’s allow individuals to save money tax free for future retirement. There are two types of IRAs – Traditional and Roth IRA’s. A traditional IRA allows contributions from both pre-tax income and after-tax income, while a Roth IRA does not permit such contribution options.
Roth IRAs are only available to those who earn less than $120,000 per year. Individuals who make over $120,000 but under $200,000 cannot open a Roth IRA. This rule applies even if the individual already owns a traditional IRA. However, there is nothing stopping an individual from opening multiple accounts in different names and contributing to each one of them without paying taxes on the earnings.
When Can I Open My First IRA?
You can open your first IRA at any age, but you must have earned income to contribute to one. If you are under the age of 18, then you can only make contributions if you have a earned income through a part-time job. If you are over the age of 70.5 and earning less than $11,700 per year, then you can contribute to a traditional IRA. If you earn over $11,700 per year, then you can contribute to a Roth IRA.
If you have earned income from a job and are between the age of 18 and 70.5 years old, then you can open a traditional or roth IRA account.
How Would I Open A Traditional Or A Roth IRA?
You can open a traditional or roth IRA by visiting your local bank or credit union. Once there, ask to speak with a personal banker. Tell them that you would like to open a traditional or roth IRA account. Most banks require a minimum deposit of $50 to open such an account.
What Documents Do I Need To Open An IRA Account?
You will need to provide the banker with some personal information such as your full name, address, social security number, and income information. The banker will use this information to fill out the necessary IRS Form 8606. After completing this form, the account will be approved and you can start making contributions.
The minimum amount to contribute to a traditional or roth IRA is $25. Individuals under the age of 50 can contribute up to $5,500 per year, while individuals over the age 50 can contribute up to $6,500 per year. Both limits were set by the IRS in 2014 and are subject to change each year. The maximum contribution per year is $6,500 for individuals who are under the age of 50 and $1,000 for individuals over the age of 50.
How Do I Know If The Contributions Are Tax Deductible?
You can find out if your contributions to a traditional or roth IRA are tax deductible by reviewing Form 8606. This form is provided to you by your banker after you open your account. The form will be completed and submitted with your tax return if you are eligible for a tax deduction.
What If I Already Have A 401K Or Pension?
You can contribute to an IRA even if you have a 401k or pension. There is no rule against having multiple retirement accounts.
What Is The Deadline For Contributions?
The deadline for traditional IRA contributions is the federal tax day which is usually April 15th. If this day falls on a weekend, you will have until the following day to submit your contribution. For roth IRAs, the deadline is the same as contribution deadlines for roth 401ks, which are the federal tax day or the following day if this day falls on a weekend.
How Do I Invest My Contributions?
After the contribution is made, the money will be stored in your traditional or roth IRA account. At this point you can visit your online brokerage and start investing in stocks, bonds, mutual funds or exchange traded funds (ETFs). You can learn more about how to choose these investments here: How To Choose Investments
How Much Can My Investments Grow Each Year?
For both roth and traditional IRAs, you can earn tax-free growth on your contributions each year. For example, if you contributed $5,000 to a traditional IRA this year, then this contribution can grow tax-free until you make a withdrawal.
What Are Some Rules For IRAs?
There are some rules that need to be followed when contributing to an roth or traditional IRA. These rules are in place to prevent individuals from misusing the IRA system and gaining unfair advantages.
For example, you must be under the age of 70 1/2 before you can make a tax-deductible contribution to an IRA. This rule helps prevent individuals from taking advantage of the tax deductions by contributing to their IRAs right before they are about to retire.
Another example is the rule on annual contribution limits. For both roth and traditional IRAs, you can only contribute a maximum of $5,500 per year if you are under the age of 50. If you are over the age of 50, you can contribute up to $6,500 per year.
How Do I Withdraw From My Account?
You can start withdrawing from your traditional or roth IRA after you reach the age of 59 1/2. You can only make tax-free withdrawals if you are over the age of 59 1/2.
What If I Start Early And Want To Stop Contributions?
If you decide that you no longer want to contribute to an IRA, you can withdraw your money and close your account at any time. You will pay taxes and a 10% early withdrawal penalty on the total amount if you are not over the age of 59 1/2 when you start the withdrawal.
What If I Make Too Much Money To Contribute?
If you earn too much money, you will not be eligible to contribute to an IRA. However, if this is the case, there are still a few options available to help you save for your retirement.
First of all, if your employer offers a 401k or similar retirement plan, make sure you are contributing the maximum allowed by the company. If you still want to save more money, you can look into traditional savings options such as a savings account or CD.
What Are The Differences Between A Roth And Traditional IRA?
There are several differences between a roth and traditional IRA. Here are some of the most important ones.
1) A roth IRA can be funded with after-tax dollars, while a traditional IRA can only be funded with pre-tax dollars.
2) Contributions to a roth IRA may be withdrawn tax and penalty free at any time.
The only requirement is that the account has been open for at least 5 years and the account holder is at least age 59 1/2.
3) Contributions to a traditional IRA may be withdrawn without penalty anytime after age 55.
4) Distributions from a traditional IRA are taxed as income, while distributions from a roth IRA are taxed as income if the account has been open for less than 5 years.
If the account has been open for 5 years or longer, all distributions are tax free.
5) You can contribute up to $5000 per year to either type of IRA, assuming you have earned income.
If you make over $125,000 per year as an individual or $183,000 if you are married and file a joint tax return, you may be subject to an adjusted gross income limitation that reduces your contribution limit. If you don’t have earned income, you may be able to qualify for a “zero-percent” roth IRA in which you contribute after-tax dollars and all future distributions are tax free.
Do I Qualify For A Roth IRA?
If you want to see if you qualify for a roth IRA, you can use this calculator.
How Do I Set Up And Fund A roth IRA?
The first thing you need to do is contact your bank, broker or financial institution of choice. Tell them that you want to set up a roth individual retirement account and they will walk you through the process of applying for one and transferring funds into it.
What if I Have More Questions?
If you have any more questions about setting up and contributing to an individual retirement account, don’t hesitate to ask.
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Learn the basics of buying and selling stocks and bonds.
The stock market can be a very profitable place for an individual to invest his or her money, assuming you know what you’re doing. This guide will give you some fundamental knowledge in this area.
What is a Stock?
A stock typically refers to a document that signifies that you own a small portion of a company (such as Apple, Ford or Nike). Normally, the value of one share of stock isn’t very much. When combined with millions of other shares it can amount to a substantial amount.
Let’s say that you invested $10 in one share of stock and that company becomes wildly successful. One share is now worth $1,000. If you decide to sell that share, you now have a profit of 9990%! Typically when people refer to stocks, they are talking about ownership in a company.
When people refer to the stock market, they are talking about a group of people (traders) that buy and sell these shares to each other. The price of these stocks fluctuate based on supply and demand and how profitable the company is doing.
What is a Bond?
A bond is very similar to a stock, except instead of being a percentage of ownership in a company, you are loaning money to a company or government. When you buy a bond, you are loaning a specific amount of money to a company or government in exchange for them paying you interest on that loan.
Where Does One Get Started?
If you have some money that you’d like to put into the stock market, the first thing you need to do is open up a free online brokerage account at places like E-Trade or Scott Trade. There are also other options such as picking a specific stock and going to a local brokerage office in person or using a robo-advisor, but the online route is easier. You can use this link to get $500 bonus with E-Trade.
How Does One Pick Stocks?
Stock picking is very difficult to do successfully over a long period of time. Most people fail. The old adage of “Don’t follow the crowd” is relevant here. If everyone is talking about a particular stock, it’s already likely to be too late to profit from it.
Don’t listen to your neighbor, don’t listen to TV news anchors, and don’t listen to some guy on the internet who claims he’s a financial guru that can pick stocks.
If you really want to pick stocks, be sure to read up on fundamental analysis and also the efficient market hypothesis.
Sources & references used in this article:
Learning to Write in Code the Value of Using Legal Writing Exercises to Teach Tax Law by SA Schumacher – Pitt. Tax Rev., 2006 – HeinOnline
Is the 19th Century Doctrine of Treaty Override Good Law for Modern Day Tax Treaties by D Sachs – Tax Law., 1993 – HeinOnline
Tax My Ride: Taxing Commuters in Our National Economy by ML Holcomb – Fla. Tax Rev., 2006 – HeinOnline
Discipline-Building and Disciplinary Values: Thoughts on Legal Writing at Year Twenty-Five of the Legal Writing Institute by JC Rideout – Legal Writing: J. Legal Writing Inst., 2010 – HeinOnline
Psychological factors and stock option exercise by C Heath, S Huddart, M Lang – The Quarterly Journal of …, 1999 – academic.oup.com