Comments on: Traditional and Roth IRA Contribution Limits http://cashmoneylife.com/traditional-roth-ira-contribution-limits/ Money Management, Small Business, Career Wed, 23 May 2012 14:30:40 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Fred http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-45558 Fred Fri, 17 Feb 2012 00:12:18 +0000 http://cashmoneylife.com/?p=1909#comment-45558 Yes, it's called recharacterizing (basically its a rollover): http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publink1000230671 Here's the section about excess contributions: http://www.irs.gov/publications/p590/ch02.html#en_US_2011_publink1000231024 Yes, it’s called recharacterizing (basically its a rollover):
http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publink1000230671

Here’s the section about excess contributions:
http://www.irs.gov/publications/p590/ch02.html#en_US_2011_publink1000231024

]]> By: Andre N http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-45550 Andre N Thu, 16 Feb 2012 03:54:04 +0000 http://cashmoneylife.com/?p=1909#comment-45550 Hi! if one falls in the phase out zone for a Roth IRA; say 116k and makes a 3k Roth Contribution for 2012, can an addtional 2k non-deductible contribution be made to a Traditional IRA to bring the total for both IRA accounts to 5k? If doing a rollover from a Traditional to Roth IRA can this be done annually if the loophole remains open? Hi!
if one falls in the phase out zone for a Roth IRA; say 116k and makes a 3k Roth Contribution for 2012, can an addtional 2k non-deductible contribution be made to a Traditional IRA to bring the total for both IRA accounts to 5k?
If doing a rollover from a Traditional to Roth IRA can this be done annually if the loophole remains open?

]]> By: Britt (Your Roth IRA) http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-37543 Britt (Your Roth IRA) Tue, 25 Oct 2011 17:13:58 +0000 http://cashmoneylife.com/?p=1909#comment-37543 One other thing to note in regard to this year's Roth IRA income limits. One thing that hasn't changed is that there continues to be no income cap for those who wish to make a Roth IRA conversion. Prior to 2010, anyone earning more than $100,000 was prohibited from converting a 401k or Traditional IRA to a Roth. But that limit disappeared in 2010 and has not been reinstituted. So if you earn too much to make a direct Roth IRA contribution, it may be possible to make non-deductible Traditional IRA contributions (which have no income cap), then convert your Traditional IRA to a Roth IRA. This effectively mimicks the same act as a Roth IRA contribution. However, if you already have a Traditional IRA with tax-deductible contributions, this will not be as simple. Either way, talk to a financial professional who can guide you through the process! One other thing to note in regard to this year’s Roth IRA income limits. One thing that hasn’t changed is that there continues to be no income cap for those who wish to make a Roth IRA conversion. Prior to 2010, anyone earning more than $100,000 was prohibited from converting a 401k or Traditional IRA to a Roth. But that limit disappeared in 2010 and has not been reinstituted.

So if you earn too much to make a direct Roth IRA contribution, it may be possible to make non-deductible Traditional IRA contributions (which have no income cap), then convert your Traditional IRA to a Roth IRA. This effectively mimicks the same act as a Roth IRA contribution. However, if you already have a Traditional IRA with tax-deductible contributions, this will not be as simple. Either way, talk to a financial professional who can guide you through the process!

]]> By: sheri gregory http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-34290 sheri gregory Wed, 24 Aug 2011 01:29:50 +0000 http://cashmoneylife.com/?p=1909#comment-34290 If I want to take money out of my Roth IRA to purchase a home, how do I go about it? Is there any penalty & taxes that I would have to pay? I've had this since 1996 If I want to take money out of my Roth IRA to purchase a home, how do I go about it? Is there any penalty & taxes that I would have to pay? I’ve had this since 1996

]]> By: Kevin M http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-33800 Kevin M Fri, 29 Jul 2011 00:51:15 +0000 http://cashmoneylife.com/?p=1909#comment-33800 Cindi--you should be able to file a 1040X to correct the problem. It's a pretty simple process, and your accountant should be able to do it with little trouble, especially if he or she prepared the original return. If so, all the information necessary is in their tax program, and they just have to change a couple of numbers. The same should be done for your state return. Cindi–you should be able to file a 1040X to correct the problem. It’s a pretty simple process, and your accountant should be able to do it with little trouble, especially if he or she prepared the original return. If so, all the information necessary is in their tax program, and they just have to change a couple of numbers.

The same should be done for your state return.

]]> By: Ryan http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-33002 Ryan Mon, 06 Jun 2011 02:29:00 +0000 http://cashmoneylife.com/?p=1909#comment-33002 Cindi, your best option is to go over last year's tax return and see if you paid any money on your taxes. If you don't know how to review your tax return, then I recommend contacting an accountant to help you with it. It wouldn't cost much money (some may even help you over the phone for free), and yes, it is absolutely worth it. Cindi, your best option is to go over last year’s tax return and see if you paid any money on your taxes. If you don’t know how to review your tax return, then I recommend contacting an accountant to help you with it. It wouldn’t cost much money (some may even help you over the phone for free), and yes, it is absolutely worth it.

]]> By: Cindi http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-32990 Cindi Sun, 05 Jun 2011 06:14:12 +0000 http://cashmoneylife.com/?p=1909#comment-32990 Hi! After filing my taxes this year and seeing that my Adjusted Gross Income is less than last year(although I made about $1000 more), I suspect that I may have paid taxes on my IRA account last year. I don't remember the prompting from last year's free tax software. Is there any way I can do anything about it now? I contributed about $4000 to the IRA, if that helps. Is it even worthwhile to pursue? Thanx! Cindi Hi! After filing my taxes this year and seeing that my Adjusted Gross Income is less than last year(although I made about $1000 more), I suspect that I may have paid taxes on my IRA account last year. I don’t remember the prompting from last year’s free tax software. Is there any way I can do anything about it now? I contributed about $4000 to the IRA, if that helps. Is it even worthwhile to pursue?
Thanx!
Cindi

]]> By: fredct http://cashmoneylife.com/traditional-roth-ira-contribution-limits/#comment-31443 fredct Fri, 01 Apr 2011 22:16:07 +0000 http://cashmoneylife.com/?p=1909#comment-31443 Table 1-2 does indicate that the person covered by the 401k at work would not qualify for a Traditional IRA deduction. Many people would say that person therefore "does not qualify for a Traditional IRA", although that's actually not officially correct, it's just that you don't quality for the deduction. You could still contribute, you just won't get a deduction for it. 1. When Can You Make Contributions? You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). Source: http://www.irs.gov/publications/p590/ch02.html#en_US_2010_publink1000231022 So it says by the due date, it says nothing about "or the date you file taxes". So it appears to me the answer is yet. Two things to watch for though: a. for some people with lower incomes, if you qualify for the retirement savers credit, you would want to file an amended return to get that credit. b. make sure that you qualify for the full contribution. Fill out worksheets 2-1 and 2-2 on the same link as above. You don't want to have a MAGI of $167,100, yet contribute the full $5K, and end up having to pay penalties later (and remember MAGI is not exactly the same as AGI). The nice thing about doing it via your tax software would be it would do the calculation for you. If you're doing it afterwards, make sure you know what you qualify for if you're close to the limit. Table 1-2 does indicate that the person covered by the 401k at work would not qualify for a Traditional IRA deduction. Many people would say that person therefore “does not qualify for a Traditional IRA”, although that’s actually not officially correct, it’s just that you don’t quality for the deduction. You could still contribute, you just won’t get a deduction for it.

1. When Can You Make Contributions?
You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).
Source: http://www.irs.gov/publications/p590/ch02.html#en_US_2010_publink1000231022

So it says by the due date, it says nothing about “or the date you file taxes”. So it appears to me the answer is yet. Two things to watch for though:

a. for some people with lower incomes, if you qualify for the retirement savers credit, you would want to file an amended return to get that credit.

b. make sure that you qualify for the full contribution. Fill out worksheets 2-1 and 2-2 on the same link as above. You don’t want to have a MAGI of $167,100, yet contribute the full $5K, and end up having to pay penalties later (and remember MAGI is not exactly the same as AGI). The nice thing about doing it via your tax software would be it would do the calculation for you. If you’re doing it afterwards, make sure you know what you qualify for if you’re close to the limit.

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