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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: IRA contribution w/ self-employment income? Date: 3/4/2003 12:40 PM
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I have $6000 in self-employment income in 2002. The self-employment tax (Form 1040) is $848. My husband and I have no other earnings. We live on our fairly modest dividend/ interest income.

I would like both of us to be able to contribute the maximum to an IRA. I have been using TaxCut software. It is telling me that neither of us is permitted to contribute any money to an IRA this year. (It changed its mind...earlier, it said I could contribute $3000, and my husband about $2700 -- I presume that is $3500, since DH is 50, minus the self-employment tax. I don't know why this changed).

Question #1: How much am I allowed to contribute to an IRA (either Traditional or Roth)?

Question #2: How much is my husband allowed to contribute?

Question #3: The penalty for contributing money to a Roth IRA, when it isn't allowed because of the rules, is 6%. This doesn't seem like a lot to me, considering how much the money can grow over the years. Is this a one-time penalty, or does the IRS re-impose the penalty it every year?

Thank you for your help.

And MANY, MANY thanks for your previous help!!!! You told me something our tax accountant missed, saving my extended family thousands of dollars :-)!
Wendy
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