Frequently Asked Tax Questions And Answers
Keyword: Nondeductible Contributions (IRA)
5.1 Pensions and Annuities: General
Am I considered covered by an employer sponsored retirement plan
for the year if I do not participate in the plan or if I did not work long
enough to be vested?
The answer to this question depends on your type of retirement plan. If
your employer's plan has a separate account for each employee. This is called
a defined contribution plan if any amount was contributed or allocated by
you or your employer to your account, you are considered covered. It does
not matter if you have worked long enough to be vested.
In the other type of plan, the plan employer must make enough contributions
(together with earnings) to provide the retirement benefit promised in the
retirement plan. This is called a defined benefit plan. In this type of plan,
if you meet the minimum age and years of service requirements to participate
in your employer's plan, you are considered covered even if you decline coverage.
It does not matter if you are vested.
The Form W-2 you receive from your employer has a box used to indicate
whether you were covered for the year. The "Pension Plan" box should have
a mark in it if you were covered.
References:
17.3 Individual Retirement Arrangements (IRAs): Roth IRA
Do I report my nondeductible Roth IRA contributions on Form 8606?
There are no forms to report a Roth contribution. The financial institution, which
is the trustee of your Roth IRA, will send you information on the amount in your Roth
IRA. They will also send the information to the Internal Revenue Service. Use Form 8606 (PDF), Nondeductible IRAs, if you made a nondeductible
contribution to a traditional IRA; converted from a traditional IRA, a SEP, or Simple
IRA to a Roth IRA, received a distribution from a traditional IRA, a SEP, or a Simple
IRA and made nondeductible contributions to a traditional IRA, or received a distribution
from a Roth or IRA.
References:
Can a person make a contribution to a SEP-IRA and a Roth IRA, too?
Yes, you can make a contribution to a SEP-IRA and a Roth IRA. See Publication 590, Individual Retirement Arrangements, for the requirements
to contribute to a SEP and a Roth IRA. However, your SEP IRA contribution and Roth
IRA contribution can not be made to the same IRA.
References:
17.4 Individual Retirement Arrangements (IRAs): Traditional IRA
If I am covered by a employer sponsored retirement plan for part of the
year, but work the rest of the year for an employer without a retirement plan, how
much of my earnings may I deduct for a traditional IRA?
The amount you can deduct will be determined by your modified Adjusted Gross Income
(AGI) and filing status. For specific information refer to Publication 590, Individual
Retirement Accounts (IRAs).
References:
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