Fidelity IRA Information on Tax
Fidelity Investments maintains more than $1 trillion dollars in assets under management through mutual funds and qualified plan management, including IRAs and 401k plans. As an industry leader, Fidelity provides investors with the resources to understand how IRAs are affected by taxes.
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Understanding Contributions
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Fidelity provides information resources for investors to understand the differences between traditional and Roth IRAs. Aside from the standard citation of a traditional being tax-deferred and a Roth being tax free, Fidelity provides investors with information to prevent over-contributions, making catch-up contributions and the income limitations for each type of IRA. Fidelity also allows investors to make contributions online and explains how to determine the year of contribution for tax purposes.
Fidelity uses simplicity to explain things to investors. The maximum you can contribute in 2009 was $5,000 of earned income. This amount increases by $500 annually to account for inflation. Those over 50 may contribute an extra $1,000 as a catch-up contribution.
Understanding Distributions
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Fidelity has an entire information section regarding IRA withdrawals. This includes regular distributions as well as helping you track Required Minimum Distribution (RMD) amounts. Fidelity explains in simple terms how an IRA owner must be 59 1/2 or older to take distributions without penalty. Early distributions may result in a tax penalty of 10 percent unless you qualify for an exemption. All distributions are reported to the IRS by a 1099R. Regarding distributions and state taxes, Fidelity reports distributions to the state listed in the address of record.
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Withholding Percentages
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Fidelity is bound by federal income tax requirements to follow tax withholding protocol for IRA distributions. The standard withholding amount is 10 percent unless the IRA owner elects a different percentage between 10 and 99 percent. Those with U.S. addresses can elect to have no withholding of federal taxes.
Resources for Filing
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Fidelity offers a "Tax Forms & Resources for Filing" section available to IRA owners via the Fidelity website. Not only do these resources help you gather the right information, but it streamlines the amount of work you need to do when filing taxes. For those who use TurboTax, Fidelity even provides a quick-link resource and allows you to import your 1099 directly into TurboTax. Web guides and tutorials help you navigate through filing tax returns and understanding your Fidelity tax statement.
Considerations
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While Fidelity offers many resources to help you make the right decision regarding your Fidelity IRA, Fidelity Investments is not a tax adviser and does not give tax advice. The information provided by Fidelity is to help investors understand the basics about IRAs and taxes. Each person's situation is unique. Consult a professional tax adviser if you have questions regarding the rules and regulations regarding IRAs.
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