IRA Certificates

IRA (Individual Retirement Account) is an individual retirement account, an important component of the US funded pension system. An IRA is an account that the contributor maintains and manages independently. Such an account can be opened with almost any financial institution: a bank, mutual fund or brokerage company. This retirement account is not taxable as long as the American payer does not withdraw money until they turn 60.

Financing an IRA account

There are several ways to fund an IRA account.

Contribution – The dollar equivalent of your contributions to the IRA account. The amount may have certain limits set by the US Federal Internal Revenue Service (IRS). Contributions must be reported to the IRS on Form 5498.

Rollover is the transfer of funds from an IRA held by another trustee / custodian to an IRA’s IB account within 60 days of distribution. Rollovers must be reported to the IRS on Form 5498. For asset rollovers, the account types must match; those if the original account is a Rosa IRA, then your IB account must also be a Rosa IRA.

Direct rollover is the transfer of funds from an employer-sponsored plan (401 (k) or other retirement plan) to a traditional IRA account with IB. If so, your plan’s trustee will list all required assets at once to IB. While direct rollover generally does not involve tax withholdings and penalties, the transfer must be notified to the IRS on Form 5498.

Trustee to Trustee – A transfer of funds from an IRA account held by another trustee / custodian, in which assets are transferred directly between the trustees / custodians without being distributed to you. An ACAT-transfer is available, but to complete it, the account number and tax ID must match. Transfers from one trustee to another do not need to be notified to the IRS.

Conversion and recharacterization

IRA conversion

When you convert your traditional IRA assets to a Roth IRA, those assets are withdrawn from your traditional IRA account and transferred to the IRA by Rosa. Withdrawals from your traditional IRA account are reported on Form 1099-R, and the contribution to your IRA Roth is reported on Form 5498. Both transactions are reported to the owner of the IRA and the IRS.

You can remove all or part of the assets from a traditional IRA and re-deposit them (within 60 days) in the IRA Roth. The amount that you can withdraw and transfer (convert) to the IRA within a certain time is called “conversion contribution”. If transferred correctly (and on time), assets are not subject to the extra 10% tax on early distributions. However, this withdrawal of funds from a traditional IRA can be partially or fully attributed to gross profit and subject to income tax. In the IRA Rosa the same assets must be converted that you received from your traditional IRA account. You can convert part of the withdrawn funds, and leave part. Your remaining balance will generally be taxed (other than the non-deductible return share) and may be subject to a 10% tax on early payouts.

IRA recharacterizations

IRA Account Recharacterization allows you to cancel or reverse a rollover or conversion to an IRA Roth. In requalification, you assign the trustee of the financial institution where your IRA Roth is issued, to transfer assets to a traditional IRA account (transfer from one trustee to another, or within the same owner). If you do this before the deadline for filing your tax return (including the extension), then this contribution can be listed as a traditional IRA, ignoring its past existence as an IRA Roth.

Recharacterization conversions made in 2018 or later is not supported. Conversions from a traditional IRA to Roth, as well as rollovers of any eligible retirement plan for the Roth after December 31, 2017 cannot be reclassified into a traditional IRA.