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April 14, 2024
Question

Worked 10 months for a company with no retirement plan. got a job with a school with a pension . Can I still right off what I put into an IRA

  • April 14, 2024
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3 replies

April 14, 2024

It depends on your Modified AGI.

 

Even with a job with a pension for 2 months of the year, you're considered covered by a retirement plan at work.

 

Please look at this IRS document to check if you're eligible for a deductible IRA contribution.

 

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Employee
April 14, 2024

If you had a job with a pension plan that is on your W-2, you do not enter that anywhere else on your tax return.  The entry from the box on your W-2 took care of that for you.  

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Employee
April 14, 2024

Unfortunately, if you are "covered" by a workplace plan for even one day, you are considered covered for the entire year.  You can always make contributions to an IRA, but you can only deduct them if you are eligible based on your income and filing status as shown on this chart.

https://www.irs.gov/retirement-plans/2023-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

 

If the contribution is non-deductible, that is not the end of the world but it does create some paperwork issues.  You have three options,

1. Recharacterize the contribution as a contribution to a Roth IRA (if your income allows).  The income limits for contributing to a Roth IRA are here.  https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023

 

A recharacterization must be done before the filing deadline (April 15, or October 15 if you get an extension.)  If you have not filed yet, you can get the extension online now.  If you have already filed, you can only recharcterize if you do it before close of business on April 15, and your bank or broker might not be able to do it in time, due to the lateness of the date.

 

2. Leave the non-deductible contribution in your IRA.  Your tax return will have a form 8606 to track the non-deductible contribution. Keep a copy of this form for the rest of your life--you will need it if you ever convert or withdraw your IRA funds, to prove that part of your IRA funds were non-deductible so that portion of the withdrawal won't be taxed in the future.

 

3. withdraw the contribution that has turned out to be non-deductible.  This must also be done by the tax filing deadline.  You must also withdraw any gains attributable to the removed contribution, and those gains are taxable on your 2023 return (this year) even though you won't get a 1099-R until next year.