Question

If under 50 years of age, a taxpayer may make a contribution to an IRA, subject to the earned income limitation and the $5,500 annual limitation.

a. True
b. False

Answer 1

The statement is historically true for the years 2014 and 2015, when taxpayers under the age of 50 could contribute up to $5,500 annually to an IRA, but current figures would need to reflect the latest IRS guidelines as these limits often change.

Step-by-step explanation:

Whether a statement is true or false concerning contributions to an Individual Retirement Account (IRA) for taxpayers under 50 depends on the tax year in question. For the tax years 2014 and 2015, the statement would have been true: taxpayers under 50 could contribute up to $5,500 annually to an IRA subject to earned income limits. However, tax laws evolve, and IRA contribution limits often change annually with inflation adjustments. Thus, for a current answer, one would need to reference the latest IRS guidelines.

Roth IRAs and traditional IRAs have different tax advantages. Contributions to a Roth IRA are made with after-tax dollars and therefore are not taxed upon withdrawal, while traditional IRA contributions are made with pre-tax dollars and are taxed upon withdrawal.

It is important to keep in mind that contribution limits can be influenced by factors other than age, including filing status, income, and whether the taxpayer has access to a workplace retirement plan like a 401(k).