Question

Spouse 401K Low contribution; can't use IRA deduction either for 2020 Tax return

Forum|Forum|5 years ago
March 1, 2021
1 reply
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My spouse's employer offered 401K in Nov'20. She contributed to her 401K in last 2 months of 2020. I also do have 401K by my employer and I have put money to the maximum allowed for tax. My spouse also has an IRA account for last few years, normally we deposit $5K in IRA per year. In 2020 turbo-tax does not allow any deduction from IRA based on our combined AGI. What options we have to get maximum benefits out of our 2 401K and 1 IRA accounts? Is I guess it is too late now to convert some of the IRA money to my spouse 401k?

M

MinhT1

Both you and your spouse are covered by a retirement plan at work. It is indicated by a check mark in box 13 - Retirement plans on your respective forms W-2. This is so even if your spouse has only contributed for the last 2 months of the year. It is too late now to add to her 401(k) contributions as she can only contribute by salary deferrals and cannot add to her 401(k) after the end of the year.

Because of this, depending on your Modified Adjusted Gross income (MAGI), you and your wife may be ineligible to contribute to a deductible Traditional IRA.

Please read this IRS document for more information.

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D

debasish75Author

@MinhT1

Thanks for your response. Couple of follow up questions:

(1) Is it too late now to rollover some IRA money into her 401K ? If this is not possible what options do we have for 2020?

(2) Also, how do we plan for 2021? what are the limits for 401K and IRA for tax year 2021? How can we plan from now so we get maximum possible contributions in both 401Ks as well as in her IRA?

Thanks in advance.