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Author: pekinrobin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Can I have an IRA if I have a KEOGH? Date: 2/16/2001 8:13 PM
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Can someone point me to a place where I can get this question answered? I am self-employed and I have a KEOGH. Every year I put the max allowable contribution in the KEOGH. This year I had a terrible year in my business and had a very low income. So the max I can put in my KEOGH is also very low.

I noticed when doing my partner's income tax this year that since his AGI was below 42K after putting the max in his employer's retirement plan, he was also allowed to contribute to his IRA this year.

Can I do the same thing even though I am my own employer? Thank you if you can point me to the right publication. I have a great deal of trouble getting sense out of the IRS and have no faith they will answer my question before April. 16. Usually whenever I've had a question I've had to find my own answer and then prove it to them. :-(

Unfortunately I am in a very specialized line of business and there are no accountants in my area that can do my taxes properly. There are damn few in the nation that do them in my area, and none that I know of that I can afford. So I don't know how to ask what seems like, should be, a simple question.
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27955 of 76418
Subject: Re: Can I have an IRA if I have a KEOGH? Date: 2/17/2001 6:50 AM
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Greetings, Pekinrobin, and welcome. You asked:

Can someone point me to a place where I can get this question answered? I am self-employed and I have a KEOGH. Every year I put the max allowable contribution in the KEOGH. This year I had a terrible year in my business and had a very low income. So the max I can put in my KEOGH is also very low.

I noticed when doing my partner's income tax this year that since his AGI was below 42K after putting the max in his employer's retirement plan, he was also allowed to contribute to his IRA this year.

Can I do the same thing even though I am my own employer? Thank you if you can point me to the right publication.


You will find the answer in our IRA area at http://www.fool.com/money/allaboutiras/allaboutiras.htm and in IRS Publication 590 (Individual Retirement Arrangements) available at http://www.irs.ustreas.gov/forms_pubs/pubs.html.

Even if you have a Keogh, as a single filer you may contribute to a deductible traditional IRA for tax-year 2000 when your AGI is $42K or lower. Between $32K and $42K part of the contribution is deductible. Above $42K nothing is. The same range for joint filers is $53K TO $63K.

Want to see if you're eligible? Check out our nifty, new IRA contribution calculator at http://www.fool.com/ira/2001/ira.htm?ref=prmptp

Regards..Pixy

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Author: ggaudzels One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27956 of 76418
Subject: Re: Can I have an IRA if I have a KEOGH? Date: 2/17/2001 8:09 AM
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Dear Pixy,
I'm above 63 K in income and can only make nondeductible IRA contributions. If I set up a nondeductible IRA account, when I distribute would I have to count my deductible SEP IRA distributions to figure out how much is taxable and how much is return of principal? Or can I just count my nondeductible IRA separate to figure out how much is taxable and how much is return of principle?

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27958 of 76418
Subject: Re: Can I have an IRA if I have a KEOGH? Date: 2/17/2001 10:11 AM
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kGreetings, ggaudzels, and welcome. You asked:

I'm above 63 K in income and can only make nondeductible IRA contributions. If I set up a nondeductible IRA account, when I distribute would I have to count my deductible SEP IRA distributions to figure out how much is taxable and how much is return of principal? Or can I just count my nondeductible IRA separate to figure out how much is taxable and how much is return of principle?

If you make those nondeductible contributions to a traditional IRA, then yes, you would use your SEP IRAs to determine the taxable part of any distribution because the SEP-IRA is a traditional IRA.

However, if all I could make is a nondeductible contribution,then I wouldn't use a traditional IRA at all. I would use a Roth while I was in the AGI range to do so. Roth earnings would never be taxed (and neither would the contributions) provided I am over 59 1/2 and the account has been open for five tax-years when I take those earnings. In a traditional IRA, the earnings always get taxed, and a part of any withdrawal will always be taxed as well. You don't have that problem with a Roth.

Regards..Pixy

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