Question

Can an individual make a contribution to an IRA based on unemployment compensation proceeds received?

What specifically would you convey to your client based on your tax research results?

IN YOUR OWN WORDS! any copied and pasted answers from a website WILL BE REPORTED. I can google it myself, without paying a subscription fee for this.

Answer 1

IRA is individual retirement arrangements . It includes

salary , wages, commission , omission or individual retirememt arrangemenys.

IRA can be in the form of stocks , bonds and mutual fund.

As name itself says individual account . therefore ofcourse , an individual can contribute to IRA based on unemployment compensation proceeds received . This is used to earn income and have retirement savings.

One of the condition IRA is that income has to be earned income to be eligible for IRA.

spouse of individual is also allowed to make contribution to IRA. For deduction , there is a need to make contribution.

There are many types of IrA

1) traditional ira 2) roth ira

3) simple ira 4 ) sep ira

INDIVIDUAL CAN ONLY MAKE CONTRIBUTION TO TRADITIONAL AND ROTH CONTRIBUTION.

& small business and self employed contribute to Sep ira and simple ira.

As per tax research

In traditionl IRA , individual cam claim deduction from income and therefore no tax on it.

But when an individual withdraw from IRA , it is taxable as income.

As per 2018 recent amendment, max. deduction upto $5500 and $6500 if age is 50 or above.

and also income of individual is also considered for deduction of IRA contribution.

when Adjusted total income is less than $ 63000 then deduct full amount.

When ATI is more than $ 63000 but less than $ 73000, some amount is only deduction.

when ATI IS more than $ 73000 then no amount is deductible ( if the employee has no plan of retirement benefits with the employer at that time )

As per Roth IRA , they are not tax deductible .

but the roth IRA , at the time of disbursement of retiremwnt benefits , they are tax free disburesement. and also when the IRA amount grows , there is no tax on increasing amount of IRA.

and when an individual withdraw from IRA , then it is not taxable as income.

Conclusion, this basic knowledge my client must be told so that the individual, enjoy maximum benefits from his low tax liability and also retirements benefits.