Certified IRA Specialist I (CIS I) — Questions and Answers

Question 1: Which form is used to report IRA contributions to the IRS?

Form 1099-R
Form W-2
Form 5498 (Correct answer)
Form 8606

Correct answer: Form 5498

Form 5498 is issued by the IRA custodian to report contributions, rollovers, and the fair market value of the IRA.

Question 2: A SEP-IRA employer contribution for a self-employed individual is limited to what percentage of net self-employment income (after the deduction)?

10%
25%
20% (Correct answer)
15%

Correct answer: 20%

Self-employed individuals can contribute up to 20% of net self-employment income (which equals 25% of compensation after the SE deduction adjustment).

Question 3: What happens to an IRA if the account holder dies without naming a beneficiary?

The IRA is split equally among all living relatives
The IRA passes through the estate and is subject to probate (Correct answer)
The IRA automatically transfers to the surviving spouse
The IRA is forfeited to the federal government

Correct answer: The IRA passes through the estate and is subject to probate

Without a named beneficiary, the IRA passes through the deceased's estate, subjecting it to probate and potentially faster distribution rules.

Question 4: What is the standard IRA contribution limit for individuals under age 50 in 2024?

$6,500
$5,500
$6,000
$7,000 (Correct answer)

Correct answer: $7,000

The IRS raised the annual IRA contribution limit to $7,000 for 2024 for individuals under age 50.

Question 5: At what age must an account holder begin taking required minimum distributions (RMDs) from a traditional IRA under current law (post-SECURE Act 2.0)?

73 (Correct answer)
72
75
70½

Correct answer: 73

Under SECURE Act 2.0 (effective 2023), the RMD age for traditional IRAs was raised to 73 for those born between 1951 and 1959.

Question 6: What is the catch-up contribution amount allowed for individuals age 50 and older in 2024?

$1,500
$3,000
$2,000
$1,000 (Correct answer)

Correct answer: $1,000

Individuals aged 50 and older may contribute an additional $1,000 catch-up contribution, bringing their 2024 total limit to $8,000.

Question 7: What is the term for the tax strategy of converting a traditional IRA to a Roth IRA in a low-income year?

Roth conversion (Correct answer)
IRA rollover
Backdoor rollover
IRA recharacterization

Correct answer: Roth conversion

A Roth conversion involves moving funds from a traditional IRA to a Roth IRA, triggering taxes now to enjoy tax-free growth later.

Question 8: What is the 'pro-rata rule' in the context of traditional IRA distributions?

Each spouse must take equal RMDs
Non-deductible contributions are distributed first
RMDs increase proportionately with age
Distributions are proportionately taxed based on the ratio of pre-tax and after-tax IRA funds (Correct answer)

Correct answer: Distributions are proportionately taxed based on the ratio of pre-tax and after-tax IRA funds

The pro-rata rule requires that distributions from a traditional IRA be taxed proportionally based on the ratio of pre-tax money to total IRA balances across all traditional IRAs.

Question 9: What is the primary purpose of IRS Form 5498?

To report IRA contributions, rollovers, RMD information, and fair market value to the IRS (Correct answer)
To report excess contributions
To report IRA distributions to the account owner
To calculate the taxable portion of IRA withdrawals

Correct answer: To report IRA contributions, rollovers, RMD information, and fair market value to the IRS

Form 5498 is filed by the IRA custodian to report contributions, rollovers, conversions, RMD requirements, and the December 31 fair market value of the account.

Question 10: Which of the following is an 'Eligible Designated Beneficiary' (EDB) who can still use the lifetime stretch IRA rule?

Adult child of the deceased
Trust named as beneficiary
Surviving spouse (Correct answer)
Estate of the deceased

Correct answer: Surviving spouse

Surviving spouses are EDBs who can still stretch IRA distributions over their own lifetime rather than being subject to the 10-year rule.

Question 11: How is the RMD amount calculated for a traditional IRA?

Account balance divided by life expectancy factor from IRS tables (Correct answer)
Fixed 4% of account balance
Account balance multiplied by your tax rate
Same fixed dollar amount each year

Correct answer: Account balance divided by life expectancy factor from IRS tables

RMDs are calculated by dividing the prior year-end account balance by the life expectancy factor from the IRS Uniform Lifetime Table.

Question 12: What is a 'per stirpes' beneficiary designation?

Designating the oldest child as sole beneficiary
Splitting the IRA equally among all living beneficiaries
A designation where a deceased beneficiary's share passes to their descendants rather than to the other named beneficiaries (Correct answer)
Naming a charity as a contingent beneficiary

Correct answer: A designation where a deceased beneficiary's share passes to their descendants rather than to the other named beneficiaries

A per stirpes designation ensures that if a primary beneficiary predeceases the IRA owner, that beneficiary's share passes to their children rather than being redistributed among surviving primary beneficiaries.

Question 13: Which of the following best describes the 'required beginning date' (RBD) for traditional IRA owners?

April 1 of the calendar year following the year they turn 73 (Correct answer)
January 1 of the year they turn 73
December 31 of the year they turn 73
April 15 of the year they turn 73

Correct answer: April 1 of the calendar year following the year they turn 73

The required beginning date for traditional IRA RMDs is April 1 of the year following the year the account holder turns 73.

Question 14: What happens if a non-spouse beneficiary inherits a Roth IRA?

They are subject to the 10-year rule but qualified distributions remain tax-free (Correct answer)
They must pay taxes on all distributions immediately
They must convert it to a traditional IRA
They can treat it as their own Roth IRA

Correct answer: They are subject to the 10-year rule but qualified distributions remain tax-free

Non-spouse Roth IRA beneficiaries must follow the 10-year rule like traditional IRA beneficiaries, but qualified distributions from the inherited Roth IRA remain income tax-free.

Question 15: Which of the following types of income qualifies as compensation for IRA contribution purposes?

Dividend income
W-2 wages (Correct answer)
Pension distributions
Rental income

Correct answer: W-2 wages

W-2 wages (earned income) qualify as compensation for IRA contribution purposes, while passive income sources do not.

Question 16: When converting a traditional IRA to a Roth IRA, what is the tax treatment of the converted amount?

It is treated as ordinary income in the year of conversion (Correct answer)
It is subject to 20% withholding
It is taxed as long-term capital gains
It is tax-free if held more than 5 years

Correct answer: It is treated as ordinary income in the year of conversion

The taxable portion of a Roth conversion is included in ordinary income in the year the conversion occurs.

Question 17: What is the annual IRA contribution limit for an individual age 55 in 2024?

$7,000
$8,000 (Correct answer)
$10,000
$6,500

Correct answer: $8,000

In 2024, individuals age 50 or older may contribute up to $8,000 to an IRA ($7,000 base + $1,000 catch-up).

Question 18: Which type of IRA does NOT require the account holder to take Required Minimum Distributions during their lifetime?

SEP-IRA
Roth IRA (Correct answer)
Traditional IRA
SIMPLE IRA

Correct answer: Roth IRA

Roth IRAs are unique in that the original owner is never required to take RMDs during their lifetime.

Question 19: At what age must traditional IRA holders begin taking Required Minimum Distributions (RMDs)?

Age 75
Age 72
Age 73 (Correct answer)
Age 70½

Correct answer: Age 73

Following the SECURE 2.0 Act, the RMD starting age for traditional IRAs is 73 for individuals born between 1951 and 1959.

Question 20: What is the penalty for withdrawing money from a traditional IRA before age 59½?

15% early withdrawal penalty
20% early withdrawal penalty
10% early withdrawal penalty (Correct answer)
5% early withdrawal penalty

Correct answer: 10% early withdrawal penalty

The IRS imposes a 10% early withdrawal penalty on distributions taken before age 59½, in addition to ordinary income taxes.

Question 21: What type of income qualifies for IRA contributions?

Rental income
Interest income
Earned income such as wages, salaries, and self-employment income (Correct answer)
Dividend income

Correct answer: Earned income such as wages, salaries, and self-employment income

IRA contributions must be funded with earned income—money received for work performed, such as wages, salaries, tips, or self-employment income.

Question 22: What is the phase-out range for married filing jointly where BOTH spouses are covered by a workplace plan for 2024?

$116,000–$136,000
$130,000–$150,000
$123,000–$143,000 (Correct answer)
$183,000–$193,000

Correct answer: $123,000–$143,000

For 2024, married couples both covered by a workplace plan face a phase-out range of $123,000 to $143,000 for traditional IRA deductibility.

Question 23: Can a spouse who does not work outside the home contribute to an IRA?

Only if married for more than 10 years
Yes, through a spousal IRA funded by the working spouse's income (Correct answer)
No, you must have earned income
Yes, but only up to $1,000

Correct answer: Yes, through a spousal IRA funded by the working spouse's income

A spousal IRA allows a non-working spouse to contribute up to the normal annual limit based on the working spouse's compensation.

Question 24: Can an IRA owner contribute to both a traditional IRA and a Roth IRA in the same tax year?

Yes, and each account has its own separate annual limit
No, you must choose one type per year
Yes, but total contributions to both cannot exceed the annual limit ($7,000 in 2024 if under 50) (Correct answer)
No, contributing to a Roth disqualifies you from any traditional IRA that year

Correct answer: Yes, but total contributions to both cannot exceed the annual limit ($7,000 in 2024 if under 50)

You can contribute to both a traditional and Roth IRA in the same year, but your combined total contributions cannot exceed the annual IRA limit.

Question 25: What is the order of distributions from a Roth IRA (ordering rules)?

Earnings first, then conversions, then contributions
Oldest contributions first
Contributions first, then conversions, then earnings (Correct answer)
All funds are distributed proportionally

Correct answer: Contributions first, then conversions, then earnings

Roth IRA ordering rules require that contributions are distributed first (always tax and penalty free), then conversions in order, then earnings last.

Question 26: How are traditional IRA distributions taxed when received by the account owner?

As long-term capital gains
As qualified dividends
As ordinary income (Correct answer)
Tax-free if held more than five years

Correct answer: As ordinary income

All deductible contributions and earnings distributed from a traditional IRA are taxed as ordinary income at the recipient's marginal tax rate.

Question 27: What is a 'Roth conversion' and what tax consequence does it trigger?

A tax-free exchange between two Roth accounts at different brokerages
Moving funds from a traditional IRA to a Roth IRA, with the converted amount taxed as ordinary income (Correct answer)
Converting after-tax 401(k) contributions to a Roth without any tax
Moving funds from a Roth to a traditional IRA with no tax due

Correct answer: Moving funds from a traditional IRA to a Roth IRA, with the converted amount taxed as ordinary income

A Roth conversion moves pre-tax traditional IRA funds into a Roth IRA, and the converted amount is included in ordinary taxable income for that year.

Question 28: If a Roth IRA owner withdraws only contributions (not earnings) before age 59½, what is the tax treatment?

20% withholding applies
10% penalty applies plus ordinary income tax
It is allowed only if used for a qualifying purpose
The withdrawal is tax-free and penalty-free (Correct answer)

Correct answer: The withdrawal is tax-free and penalty-free

Roth IRA contributions can be withdrawn at any time, at any age, without taxes or penalties, because they were made with after-tax dollars.

Question 29: What is 'recharacterization' in the context of IRAs?

Converting a traditional IRA to a Roth IRA
Rolling an IRA into a 401(k)
Changing the beneficiary of an IRA
Reversing or redesignating a contribution from one IRA type to another (Correct answer)

Correct answer: Reversing or redesignating a contribution from one IRA type to another

Recharacterization allows you to redesignate a contribution made to one type of IRA (e.g., Roth) as a contribution to another type (e.g., traditional).

Question 30: Can a Roth IRA conversion be reversed (recharacterized back to a traditional IRA)?

No, the Tax Cuts and Jobs Act of 2017 permanently eliminated recharacterizations of conversions (Correct answer)
Only if the account lost value
Yes, within 60 days
Yes, by October 15 of the following year

Correct answer: No, the Tax Cuts and Jobs Act of 2017 permanently eliminated recharacterizations of conversions

The Tax Cuts and Jobs Act of 2017 eliminated the ability to recharacterize (undo) Roth conversions, making conversions permanent.

Question 31: What tax consequence applies when IRA contributions exceed the annual limit and the excess is not corrected?

A 20% accuracy-related penalty on the excess
A 6% excise tax on the excess for each year it remains (Correct answer)
A 10% early withdrawal penalty on the excess
Ordinary income tax on the excess in the year contributed

Correct answer: A 6% excise tax on the excess for each year it remains

Excess IRA contributions are subject to a 6% excise tax for every tax year the excess amount remains in the account.

Question 32: As of 2020, what is the maximum age at which you can make traditional IRA contributions?

There is no age limit (Correct answer)
70½
73
72

Correct answer: There is no age limit

The SECURE Act of 2019 eliminated the prior age 70½ cutoff for traditional IRA contributions, effective January 1, 2020.

Question 33: What is the 5-year rule for Roth IRA earnings?

Contributions can only be withdrawn after 5 years
You must wait 5 years between Roth conversions
Earnings can be withdrawn tax-free only if the account has been open at least 5 years and you are 59½ or older (Correct answer)
You must hold a Roth IRA for 5 years before making any contributions

Correct answer: Earnings can be withdrawn tax-free only if the account has been open at least 5 years and you are 59½ or older

The 5-year rule requires a Roth IRA to be open for at least 5 years before earnings can be withdrawn tax-free, combined with meeting the age requirement.

Question 34: A married individual filing separately who is covered by a workplace retirement plan faces a deductibility phase-out range starting at:

$73,000
$50,000
$0 (Correct answer)
$25,000

Correct answer: $0

Married individuals filing separately who are covered by a workplace plan have a phase-out range of $0 to $10,000, making full deductibility nearly impossible.

Question 35: Which form must be filed to track non-deductible traditional IRA contributions?

Form 1040-SR
Form 5329
Form 8606 (Correct answer)
Form W-2P

Correct answer: Form 8606

Form 8606 is used to record non-deductible IRA contributions and to calculate the taxable portion of future distributions using the pro-rata rule.

Question 36: Which exception to the early withdrawal penalty applies to individuals who have separated from service and are at least age 55?

IRA exception for medical expenses
First-time homebuyer exception
Substantially equal periodic payments
The rule of 55 (applies to 401(k) plans, NOT IRAs) (Correct answer)

Correct answer: The rule of 55 (applies to 401(k) plans, NOT IRAs)

The 'Rule of 55' applies to qualified plans like 401(k)s, NOT to IRAs; the comparable IRA exception is substantially equal periodic payments (SEPP).

Question 37: Which of the following best describes 'tax-deferred growth' in a traditional IRA?

You never pay taxes on IRA gains
Taxes are paid annually on dividends
Investment gains are not taxed until you withdraw the money (Correct answer)
Growth is taxed at the capital gains rate

Correct answer: Investment gains are not taxed until you withdraw the money

In a traditional IRA, investment earnings compound without being taxed each year; taxes are only owed when you take distributions.

Question 38: Under the Tax Cuts and Jobs Act, alimony received from divorce agreements finalized after December 31, 2018 is treated as:

Earned income only if the payer elects it
Partially earned income up to $6,000
Not earned income for IRA contribution purposes (Correct answer)
Earned income eligible for IRA contributions

Correct answer: Not earned income for IRA contribution purposes

Alimony from post-2018 divorce agreements is no longer deductible by the payer or included in the recipient's income, so it does not count as earned income for IRA purposes.

Question 39: What is a Roth IRA conversion and what tax event does it trigger?

Moving pre-tax funds from a traditional IRA or employer plan to a Roth IRA, triggering ordinary income tax on the converted amount (Correct answer)
Moving money from a Roth IRA to a traditional IRA, tax-free
A tax-free exchange between two Roth IRAs
An automatic annual conversion based on income

Correct answer: Moving pre-tax funds from a traditional IRA or employer plan to a Roth IRA, triggering ordinary income tax on the converted amount

A Roth conversion moves pre-tax funds to a Roth IRA, and the converted amount is included in ordinary income in the year of conversion.

Question 40: What is the deadline for making an IRA contribution that counts toward the prior tax year?

April 15 of the following year (Correct answer)
October 15 of the following year
December 31 of the tax year
January 31 of the following year

Correct answer: April 15 of the following year

IRA contributions for a given tax year can be made up to the tax filing deadline, typically April 15 of the following year.

Question 41: Can a minor child with earned income open and contribute to a Roth IRA?

No, IRAs require the account holder to be at least 18
Yes, any person with earned income can contribute to a Roth IRA regardless of age (Correct answer)
Only if a parent co-signs the account
Only if they earn more than $5,000

Correct answer: Yes, any person with earned income can contribute to a Roth IRA regardless of age

There is no minimum age for a Roth IRA; any person with earned income (including minors) can contribute up to their earned income or the annual limit, whichever is less.

Question 42: An IRA owner who turns 73 in 2024 must take their first Required Minimum Distribution (RMD) by what deadline?

April 1, 2025 (Correct answer)
December 31, 2025
December 31, 2024
April 15, 2025

Correct answer: April 1, 2025

Under SECURE 2.0, the RMD beginning date is April 1 of the year following the year the owner turns 73.

Question 43: How are traditional IRA contributions treated for tax purposes if you are covered by a workplace retirement plan and earn above the phase-out threshold?

They are taxed twice — once now and once at withdrawal
They are not allowed at all
They are non-deductible but grow tax-deferred (Correct answer)
They are fully tax-deductible

Correct answer: They are non-deductible but grow tax-deferred

If you're covered by a workplace plan and exceed income limits, traditional IRA contributions are non-deductible but still grow tax-deferred.

Question 44: Which type of income qualifies as earned income for traditional IRA contribution purposes?

Self-employment net earnings (Correct answer)
Rental income
Capital gains distributions
Dividend income

Correct answer: Self-employment net earnings

Net self-employment earnings count as earned income for IRA contribution purposes, while passive income such as dividends, capital gains, and rent do not.

Question 45: Which of the following people is eligible to contribute to a Roth IRA?

A single 45-year-old with $120,000 in wages and no workplace retirement plan (Correct answer)
A dependent child with no earned income
A single filer with $200,000 in W-2 wages
A retiree with $80,000 in Social Security income and no earned income

Correct answer: A single 45-year-old with $120,000 in wages and no workplace retirement plan

A single filer earning $120,000 in wages is well within the Roth IRA income phase-out range and has earned income, making them fully eligible.

Question 46: What happens if an individual contributes more than the allowed IRA limit in a given year?

A 10% penalty applies
A 6% excise tax is imposed on the excess amount (Correct answer)
The excess is automatically refunded
The IRA is disqualified

Correct answer: A 6% excise tax is imposed on the excess amount

The IRS imposes a 6% excise tax each year on excess IRA contributions until they are corrected.

Question 47: Which of the following correctly describes a 'recharacterization' of an IRA contribution?

Transferring a contribution plus earnings from one IRA type to another as if originally made to the second type (Correct answer)
Converting a Traditional IRA to a Roth IRA
Withdrawing an excess contribution with net income attributable
Rolling over an IRA to an employer plan

Correct answer: Transferring a contribution plus earnings from one IRA type to another as if originally made to the second type

A recharacterization treats a contribution as if it had originally been made to a different IRA type by transferring the contribution plus net income attributable by the tax deadline.

Question 48: How many IRA rollovers are you allowed to perform in a 12-month period?

Three
Unlimited
One (Correct answer)
Two

Correct answer: One

The IRS limits taxpayers to one indirect (60-day) IRA rollover per 12-month period across all IRAs combined.

Question 49: How does a SEP-IRA differ from a traditional IRA in terms of contribution limits?

SEP-IRA allows contributions up to 25% of compensation or $69,000 (2024) (Correct answer)
SEP-IRA has the same limit as a traditional IRA
SEP-IRA limits contributions to $15,000 per year
SEP-IRA contributions are not tax-deductible

Correct answer: SEP-IRA allows contributions up to 25% of compensation or $69,000 (2024)

A SEP-IRA allows employers to contribute up to 25% of an employee's compensation or $69,000 for 2024, far exceeding traditional IRA limits.

Question 50: What is the difference between a 'designated beneficiary' and an 'eligible designated beneficiary' for inherited IRA purposes?

A designated beneficiary follows the 10-year rule; an eligible designated beneficiary can use lifetime stretch distributions (Correct answer)
An EDB must be a spouse; a designated beneficiary can be anyone
There is no practical difference
A designated beneficiary gets tax-free distributions; an EDB does not

Correct answer: A designated beneficiary follows the 10-year rule; an eligible designated beneficiary can use lifetime stretch distributions

Designated beneficiaries (non-EDBs) follow the 10-year rule under SECURE Act, while eligible designated beneficiaries (surviving spouse, minor children, disabled/chronically ill, and those within 10 years of owner's age) can use the lifetime stretch.

Question 51: At what age must required minimum distributions (RMDs) begin from a traditional IRA for individuals born between 1951 and 1959?

70½
72
73 (Correct answer)
75

Correct answer: 73

Under the SECURE 2.0 Act, the RMD starting age is 73 for those born between 1951 and 1959, with the first RMD due by April 1 of the following year.

Question 52: What is the penalty for failing to take a required minimum distribution (RMD) from a traditional IRA?

Flat $500 fee
25% of the amount not withdrawn (Correct answer)
10% of the RMD amount
50% of the amount not withdrawn

Correct answer: 25% of the amount not withdrawn

Under SECURE Act 2.0, the penalty for missing an RMD was reduced from 50% to 25% of the amount that should have been withdrawn.

Question 53: What does the term 'excess contribution' mean in relation to IRAs?

Contributing to too many IRA accounts
Contributing more than the IRS annual limit (Correct answer)
Contributing more than your income allows
Contributing during a year you have no earned income

Correct answer: Contributing more than the IRS annual limit

An excess contribution occurs when you deposit more into your IRA than the IRS annual contribution limit allows, triggering a 6% excise tax.

Question 54: If a non-spouse beneficiary inherits a traditional IRA, what rule generally applies under the SECURE Act?

They must take RMDs based on the original owner's age
They must convert it to a Roth IRA
They must withdraw all funds within 10 years (Correct answer)
They can keep the IRA indefinitely

Correct answer: They must withdraw all funds within 10 years

Under the SECURE Act, most non-spouse beneficiaries must fully distribute inherited IRA assets within 10 years of the original owner's death.

Question 55: What is a 'see-through trust' in the context of IRA beneficiary designations?

A trust used exclusively for Roth IRA assets
A transparent investment strategy for IRAs
A trust that meets IRS requirements so that individual trust beneficiaries are treated as designated beneficiaries for distribution purposes (Correct answer)
An IRA held in a revocable trust

Correct answer: A trust that meets IRS requirements so that individual trust beneficiaries are treated as designated beneficiaries for distribution purposes

A see-through (or look-through) trust allows the trust to be treated as a designated beneficiary if it meets specific IRS requirements, including that all beneficiaries are identifiable individuals.

Question 56: Can a qualified distribution from a Roth IRA be included in the calculation of provisional income that determines Social Security taxation?

Yes, always
No, qualified Roth distributions are excluded from provisional income (Correct answer)
Only if over $85,000
Only for married filers

Correct answer: No, qualified Roth distributions are excluded from provisional income

Qualified Roth IRA distributions are tax-free and are not included in the provisional income calculation used to determine if Social Security benefits are taxable.

Question 57: What is the penalty for over-contributing to an IRA?

The excess is automatically returned with no penalty
5% excise tax per year the excess remains
10% excise tax applied once
6% excise tax per year the excess remains (Correct answer)

Correct answer: 6% excise tax per year the excess remains

The IRS charges a 6% excise tax each year on excess IRA contributions that are not corrected before the tax deadline.

Question 58: What does 'spousal IRA' allow a married couple to do?

Double the contribution limit for a working spouse
Allow a non-working spouse to contribute to an IRA based on the working spouse's income (Correct answer)
Split one IRA account between two spouses
Combine both spouses' incomes to reduce tax liability

Correct answer: Allow a non-working spouse to contribute to an IRA based on the working spouse's income

A spousal IRA allows a non-working or low-earning spouse to contribute to their own IRA based on the working spouse's earned income.

Question 59: Under SECURE 2.0, which new rule allows Roth treatment inside SIMPLE and SEP-IRAs?

Mandatory Roth matching contributions
Roth catch-up contributions only
Optional Roth elective deferrals for SIMPLE IRAs and Roth SEP contributions (Correct answer)
Automatic Roth conversion at age 60

Correct answer: Optional Roth elective deferrals for SIMPLE IRAs and Roth SEP contributions

SECURE 2.0 allows SIMPLE IRAs to offer Roth elective deferrals and SEP-IRAs to accept Roth contributions, effective 2023.

Question 60: What is the income limit for married filing jointly couples to contribute directly to a Roth IRA in 2024?

Phase-out $183,000–$193,000
Phase-out $193,000–$203,000 (Correct answer)
Phase-out $230,000–$240,000
Phase-out $218,000–$228,000

Correct answer: Phase-out $193,000–$203,000

For 2024, married filing jointly couples face a Roth IRA phase-out range of $230,000–$240,000.

Question 61: When must a SEP-IRA contribution be made for it to count for a given tax year?

By October 15 of the following year
By December 31 of the tax year
By the employer's tax return deadline including extensions (Correct answer)
By April 15 of the following year

Correct answer: By the employer's tax return deadline including extensions

SEP-IRA contributions can be made up to the employer's tax return deadline including extensions, which can be as late as October 15.

Question 62: What is a Substantially Equal Periodic Payment (SEPP) plan used for?

Splitting an IRA between multiple beneficiaries
Increasing IRA contributions gradually over time
Converting a traditional IRA to Roth in equal installments
Taking penalty-free distributions before age 59½ using IRS-approved methods (Correct answer)

Correct answer: Taking penalty-free distributions before age 59½ using IRS-approved methods

A SEPP plan (also known as 72(t) distributions) allows account holders to take penalty-free distributions before 59½ using one of three IRS-approved calculation methods.

Question 63: The deductibility of a traditional IRA contribution phases out for single filers covered by a workplace plan at what income range in 2024?

$60,000–$70,000
$77,000–$87,000 (Correct answer)
$73,000–$83,000
$68,000–$78,000

Correct answer: $77,000–$87,000

For 2024, the phase-out range for single filers with a workplace plan is $77,000 to $87,000 of modified AGI.

Question 64: A surviving spouse who inherits an IRA can choose to treat it as their own IRA. What is the main benefit of this election?

They can contribute unlimited amounts to the inherited IRA
They can convert it to a Roth IRA tax-free
They immediately avoid all taxes on distributions
They can delay RMDs until they reach their own RMD age (Correct answer)

Correct answer: They can delay RMDs until they reach their own RMD age

By treating the inherited IRA as their own, the surviving spouse delays RMDs until they reach RMD age, potentially providing years of additional tax-deferred growth.

Question 65: What is a 'net unrealized appreciation' (NUA) strategy and how does it relate to IRA rollovers?

An IRA investment strategy using index funds
A way to avoid all taxes on employer stock
A strategy to distribute employer stock from a 401(k) in-kind rather than rolling it to an IRA, taxing appreciation at capital gain rates instead of ordinary income rates (Correct answer)
A method to reduce RMDs by 50%

Correct answer: A strategy to distribute employer stock from a 401(k) in-kind rather than rolling it to an IRA, taxing appreciation at capital gain rates instead of ordinary income rates

NUA allows the appreciation on employer stock distributed from a 401(k) to be taxed at capital gains rates rather than ordinary income rates, which can be more favorable than rolling to an IRA.

Question 66: When can Roth IRA contributions (not earnings) be withdrawn?

Only after age 59½
At any time, tax-free and penalty-free (Correct answer)
Only after the account has been open for 5 years
Only for qualified expenses like education or home purchase

Correct answer: At any time, tax-free and penalty-free

Roth IRA contributions (not earnings) can always be withdrawn at any time, tax-free and penalty-free, since they were made with after-tax dollars.

Question 67: Which type of distribution from an IRA is NOT eligible to be rolled over?

A distribution from an inherited IRA to a spouse beneficiary
A rollover from a prior employer's 401(k)
A lump-sum distribution from a traditional IRA
A required minimum distribution (RMD) (Correct answer)

Correct answer: A required minimum distribution (RMD)

Required minimum distributions (RMDs) are not eligible for rollover; they must be withdrawn and cannot be re-deposited into an IRA.

Question 68: Regarding the Form 8995 Qualified Business Income (QBI) Deduction Simplified Computation, whether of the following claims is true?

The QBI Deduction must be claimed by a partnership by attaching Form 8995 to their partnership tax return.
To claim the QBI Deduction on their corporate taxes, corporations must file Form 8995.
To claim the QBI Deduction, a single person with QBI whose taxable income is below the threshold amount must use Form 8995. (Correct answer)
If it is found that a taxpayer qualifies for the QBI Deduction, the IRS will send them Form 8995.

Correct answer: To claim the QBI Deduction, a single person with QBI whose taxable income is below the threshold amount must use Form 8995.

Taxpayers with qualified business income (QBI) whose taxable income falls below the annual threshold amount are required to use Form 8995, Qualified Business Income (QBI) Deduction Simplified Computation. This form helps calculate the correct QBI deduction, even for those below the threshold, by considering their QBI, taxable income, and other relevant factors. It ensures the deduction is properly determined and reported.

Question 69: What does 'IRA basis' refer to?

The total amount of earnings in the IRA
The original purchase price of investments inside the IRA
Non-deductible contributions made to a traditional IRA that have already been taxed (Correct answer)
The market value of all assets held in the IRA

Correct answer: Non-deductible contributions made to a traditional IRA that have already been taxed

IRA basis refers to non-deductible contributions in a traditional IRA — amounts already taxed — which are tracked using IRS Form 8606 to avoid double taxation.

Question 70: Which of the following does NOT count as earned income for purposes of making an IRA contribution?

Wages from a part-time job
Interest and dividend income (Correct answer)
Taxable combat pay elected by a military member
Net profit from a sole proprietorship

Correct answer: Interest and dividend income

Interest and dividend income are considered investment income, not earned income, and therefore cannot be used as the basis for an IRA contribution.

Question 71: How many times per year can an individual perform an indirect (60-day) IRA-to-IRA rollover?

Unlimited
Twice per year
Once per year across all IRAs (Correct answer)
Once per IRA account

Correct answer: Once per year across all IRAs

Under IRS rules (after the Bobrow v. Commissioner case), only one indirect rollover is allowed per year across all of an individual's IRAs combined.

Question 72: What is 'Roth IRA seasoning' and why does it matter for Roth conversions?

A strategy for increasing Roth contributions each year
The requirement that each Roth conversion must be held five years before earnings can be withdrawn tax-free and penalty-free (Correct answer)
The process of diversifying Roth IRA investments over time
The annual contribution review process

Correct answer: The requirement that each Roth conversion must be held five years before earnings can be withdrawn tax-free and penalty-free

Each Roth conversion has its own five-year holding period before the converted earnings can be withdrawn without penalty, though the tax-free treatment of earnings depends on the overall Roth account being aged 5 years.

Question 73: What is a 'mega backdoor Roth' strategy?

Combining multiple Roth IRAs to maximize returns
Contributing the maximum to a Roth IRA every year for multiple decades
Making after-tax 401(k) contributions above the normal limit and rolling them to a Roth IRA or converting in-plan (Correct answer)
Rolling a SEP-IRA to a Roth IRA

Correct answer: Making after-tax 401(k) contributions above the normal limit and rolling them to a Roth IRA or converting in-plan

The mega backdoor Roth allows after-tax 401(k) contributions (beyond normal limits) to be converted to Roth status, potentially adding tens of thousands in Roth savings annually.

Question 74: When rolling over a 401(k) to a traditional IRA, how much mandatory withholding applies to a lump-sum distribution?

25%
10%
20% (Correct answer)
0%

Correct answer: 20%

Employer plans are required to withhold 20% for federal taxes on lump-sum distributions, even if you intend to roll the funds over.

Question 75: What is the 'backdoor Roth IRA' strategy used for?

Converting an employer plan to a Roth without taxes
Splitting IRA assets between spouses
Allowing high-income earners to contribute to a Roth IRA indirectly (Correct answer)
Avoiding all taxes on IRA distributions

Correct answer: Allowing high-income earners to contribute to a Roth IRA indirectly

The backdoor Roth involves making a non-deductible traditional IRA contribution and then converting it to a Roth, bypassing income limits.

Certified IRA Specialist I (CIS I)

The CIS I exam tests knowledge of Individual Retirement Account fundamentals for financial services professionals, covering IRA contributions, distributions, rollovers and transfers, and federal reporting requirements.

Questions

180 min

Time Limit

80%

To Pass

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