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djruiz wrotes:

<<Another thought is, if I put the $2000 in, and then early next year find out that I wasn't supposed to, is it possible to take it back out as if I never put it in in the first place. Somebody mentioned that this might be possible and something I should consider.>>

Roy wrotes:

Sure...you can recharacterize the Roth IRA back to a traditional IRA (including the contributions and the earnings). The deductibility of the IRA will be based upon a new set of rules (as noted in the Taxes FAQ area). But the worst that would happen is that you would have a non-deductible traditional IRA.

If it turn out that Dan can't contribute to his Roth IRA because he received no compensation, then he won't be able to recharacterize to the traditional IRA because he still wouldn't have any compensation to be eligible to contribute to a traditional IRA.

So, his is only option is really to withdraw his contribution and its earning. No penalty. But he'll have to pay tax on his earning.

But I don't think Dan have anything to worry about because I agree with everyone that severance pay=termination pay=payment for services rendered=compensation. Likewise for bonuses. (Sorry, no definitive quote, but Pub 17 Your Federal Income Tax & Pub 15 Circular E, Employer's Tax Guide give very strong indication--I'm trying to read the tax code, but those suckers are confusing.)
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