Tax Preparer Practice Exam 2025 - Free Tax Preparer Practice Questions and Study Guide

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What term is used when a taxpayer adds money to an IRA?

Distribution

Contribution

The term "Contribution" is used when a taxpayer adds money to an Individual Retirement Account (IRA). Contributions are the amounts deposited into the IRA to help fund the retiree's future savings. Individuals can make contributions to traditional IRAs or Roth IRAs with certain limits and eligibility requirements based on their income, tax filing status, and age.

When contributing to an IRA, taxpayers may also receive certain tax benefits, such as the ability to deduct contributions to a traditional IRA on their tax return, depending on their circumstances. However, the act of putting money into the IRA specifically refers to it as a contribution, distinguishing it from terms like distribution, which refers to withdrawals from the IRA, or rollover, which describes the transfer of funds from one retirement account to another.

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Roll-over

Deduction

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