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1. Can she keep her traditional IRA and just not contribute any more to it.

Sure. Assuming that there is some salary that is not covered by the Foreign Earned Income Exclusion, that is.

2. Does the fact that she has already made some contributions for this year matter?

Nope. What matters is what her tax return looks like at the end of the year. If there are problems with the contribution she's already made, she will have a few options. Maybe the IRA can be non-deductible. Maybe she can recharacterize the IRA contributions as Roth IRA contributions. And she can always withdraw excess contributions (along with their earnings) if necessary.

The company FAQ says you can have 2 401K'S, one traditional and one Roth. Just the contribtion limit stays at $15,500 for the year.

Correct.

She will have some taxable income this year both from her current job and the one she left when she went to Iraq in March. So between the two or the IRA she may be able to escape all taxes this year.

Off the top of my head, I'm not certain exactly how the FEIE interacts with the income limits on traditional IRA contributions. It's possible that with the retirement plan coverage from the 401k that she'll be over the limit for deductible contributions. In that case, she could consider the contributions to be non-deductible. Or probably a better choice would be to recharacterize them to a Roth IRA - again assuming the income limits are not a problem.

--Peter
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