Frequently Asked Tax Questions

Retirement Plans

Q. Where can I get information on tax preparation?

A. The IRS offers a number of publications, available free of charge, which may help you complete your tax return. They may be obtained by calling 1-800-TAX-FORM (1-800-829-3676) or by visiting their website at www.irs.gov.

Q. What are IRAs (Individual Retirement Accounts)?

A. An IRA is a personal, tax-deferred retirement account. The government created IRAs in 1974 to help workers save for retirement. IRAs' tax-advantaged savings status makes them an integral component of many investors' long-term plans.

Q. What is a Traditional IRA?

A. A Traditional IRA allows your assets to grow tax-deferred, meaning you won't pay taxes on earnings until you withdraw the assets. This allows your investment to grow faster. Contributions to a Traditional IRA may also be tax-deductible for many investors.

Q. What is a Roth IRA?

A. Assets grow federal tax-free with a Roth IRA, meaning you do not pay federal income taxes on your earnings, provided certain requirements are met. You can also make penalty-free withdrawals prior to age 59 ½ for a first time home purchase, up to a lifetime limit of $10,000, or for qualified educational expenses. Contributions to a Roth IRA are not tax deductible.

Q. How do I know if I'm eligible for a Roth IRA?

A. For tax year 2017, singles who earn less than $118,000 per year and married couples who earn less than $186,000 per year can contribute up to $5,500 to a Roth IRA annually. Individuals 50 years old and older may contribute an additional $1,000. The contribution limit decreases as your income rises; singles earning more than $133,000 per year or married couples earning more than $196,000 can no longer contribute to a Roth IRA. Unlike a Traditional IRA, a Roth IRA allows you to contribute even after you reach age 70 ½.

For tax year 2018, singles who earn less than $120,000 per year and married couples who earn less than $189,000 per year can contribute up to $5,500 to a Roth IRA annually. Individuals 50 years old and older may contribute an additional $1,000. The contribution limit decreases as your income rises; singles earning more than $135,000 per year or married couples earning more than $199,000 can no longer contribute to a Roth IRA. 

Unlike a Traditional IRA, a Roth IRA allows you to contribute even after you reach age 70 ½.

Q. How do I choose which IRA is right for me?

A. You should ask yourself a few key questions:

  1. Does my Adjusted Gross Income (AGI) and my tax filing status make me eligible for a Roth IRA? If the answer is No, then a Traditional IRA may be a better choice. If Yes, then ask yourself the next question:
  2. Am I eligible to deduct contributions to a Traditional IRA? If the answer is No, then a Roth IRA may be a better choice. If Yes, then ask yourself the next question:
  3. Do I expect my tax rate to be the same or higher when I retire? If the answer is No, then a Traditional IRA may be a better choice. If Yes, then consider contributing to a Roth IRA. Please consult your tax adviser for more information.
Q. What do I need to know about Required Minimum Distributions (RMD)?

A. Your RMD is based upon life expectancy figures generally determined using one uniform life-expectancy table. The table assumes a beneficiary exactly 10 years younger than the IRA holder or participant — regardless of who is the named beneficiary. For a spouse beneficiary who is more than ten years younger than the account holder and is sole beneficiary of the account, the account holder may use the actual recalculated joint life expectancy of the account holder and the spouse beneficiary rather than the figure from the uniform life expectancy table.

Generally, a Roth IRA owner is not required to take a RMD during his or her lifetime.  Beneficiaries of a Roth IRA, however, are subject to minimum distribution requirements.

Q. What is a Coverdell Education Savings Account?

A. A Coverdell Education Savings account is a tax-advantaged savings vehicle designed to help save money for a child's future education expenses. You may contribute up to $2,000 each year for anyone under the age of 18. Contributions are not tax deductible, however, when the beneficiary withdraws the money to pay for qualified higher education expenses (for example, tuition, fees, room and board), the withdrawals will generally be tax-free.

Note: The $2,000 annual limit applies per child, not per contributor.

Q. What can I expect to see reported on my Form 1099-R?

A. If you receive a distribution from your IRA, you will receive Form 1099-R. IRA distributions are shown in boxes 1 and 2 of Form 1099-R. A number or letter code in box 7 tells you what type of distribution you received from your IRA.

General Tax Information

Q. What is a capital gain/loss?

A. A gain or loss arising from the sale or exchange of capital assets. You compute your capital gain or loss by comparing the amount you realize on the sale or exchange of an asset with the adjusted cost basis of the asset.

Q. For tax purposes, what makes a capital gain or loss long-term versus short-term?

A. Capital assets that are sold less then one year after acquisition date are categorized as short-term gains or losses. A long-term gain or loss would arise upon disposition of a capital asset held for more than one year. In either case, consult a tax adviser to determine the tax rate applicable to you.

Q. Why don't I see my short-term capital gains listed separately on my Form 1099-DIV?

A. Short-term capital gains generated by the sale of mutual fund shares are required by the IRS to be treated as ordinary dividends on Form 1099-DIV and subject to ordinary income tax.

Q. Are my reinvested dividends taxable to me?

A. Yes, in non-retirement accounts, whether you reinvest the dividends back into the funds or take the dividends as cash, they are considered taxable. In retirement plans, dividends are tax-deferred until distributed from the plan.

Q. What is the Alternative Minimum Tax (AMT)?

A. An Alternative Minimum Tax (AMT) is a tax that may apply in lieu of income tax when a taxpayer has tax preference items or certain deductions able in determining regular taxable income.

Q. Do I need to report to the IRS when I exchange from one fund into another?

A. Yes; an exchange of non-money market mutual fund shares in a non-retirement account is considered to be a sale by tax definitions. SunAmerica Mutual Funds will send you a Form 1099-B that will show you the gross proceeds of the sale. This information is reported to the IRS.

Q. How far back can SunAmerica Mutual Funds go to calculate cost basis for my account?

A. SunAmerica Mutual Funds can provide cost basis for accounts (a few exceptions apply) opened after January 1, 1994. The cost basis information is separate from your Form 1099-B and is not sent to the IRS. You may use the information we provide or calculate your own cost basis using a different method, such as specific identification of shares. However, it is suggested that you consult your tax adviser regarding cost basis information.

Beginning 2012: Mutual fund companies are required to provide cost basis information to shareholders and to the Internal Revenue Service (IRS) on mutual fund shares acquired on, and subsequently redeemed after January 1, 2012.  For more information, please review the Cost Basis Reporting section of Tax Center.

Q. Do special tax rules apply to nonresident aliens?

A. If you are a nonresident alien, the rules and tax forms that apply to you are different from those that apply to U.S. citizens and resident aliens. See Publication 519, U.S. Tax Guide for Aliens, to find out if U.S. income tax laws apply to you and which forms to file.

Supplemental Tax Information

Supplemental Tax Information This information will assist you in planning and reporting your federal and state taxable income.