What is the term for withdrawing money from an IRA?

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The term for withdrawing money from an IRA is "Distribution." When an account holder takes money out of their Individual Retirement Account (IRA), this transaction is categorized as a distribution. Distributions can occur under various circumstances, such as reaching retirement age, making early withdrawals (which may incur penalties), or other qualifying events.

Understanding the concept of distributions is important for tax preparers because they can have tax implications that vary depending on the type of IRA (traditional or Roth), the age of the account holder, and the reason for withdrawal. For instance, traditional IRA distributions are generally subject to income tax, while qualified distributions from a Roth IRA may be tax-free.

The other terms provided have distinct meanings: a contribution refers to the money put into an IRA; a roll-over involves transferring funds from one retirement account to another, usually to maintain tax-deferred growth; and deferral pertains to the postponement of tax liabilities until a later date, commonly associated with the growth of funds within the IRA itself.

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