Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (18) | Ignore Thread Prev Thread | Next Thread
Author: footsox Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120806  
Subject: IRA limits? Date: 4/16/2011 3:14 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I have tried to find a link to the IRA rules for income limits and everything I find appears to not quite fit my situation. I believe the income limit is $179,000. If we file income tax jointly -- is that $179,000 for EACH of us? Or together?

The spouse and I are self employed - we both work in the business. Our CPA tells us we make too much (around $260K AGI). I saw a CNBC segment the other day with Susie Orman and she said if you made less than $179K AGI - adjusted gross income - you could open a traditional IRA and then convert it to a Roth immediately. I don't know if the $179K is for each one of us? I don't know if it has to be converted to a Roth immediately - meaning by the IRS deadline for this year?

Can anyone point me to an IRS link that spells out the limits? Can anyone comment on the Susie Orman suggestion of opening a traditional IRA and then converting to a Roth IRA? And do we have until the end of Monday (April 17th) to do all that? Thanks for any info. I appreciate it.

Footsox
Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113146 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 6:43 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Can anyone point me to an IRS link that spells out the limits?

IRS Publication 590. At your income level if you are covered by a retirement plan set up for your business (SEP, SIMPLE, 401(k), Keough) the only type of IRA contribution available to you is a nondeductible traditional IRA.

Can anyone comment on the Susie Orman suggestion of opening a traditional IRA and then converting to a Roth IRA?

We talked a lot about it here early in 2010 when the rules changed and this strategy became available for some people with high incomes. Missing from your narrative is one key piece of information. What existing traditional IRA accounts, including SEPs, SIMPLEs and rollovers from employer plans, do you have?

And do we have until the end of Monday (April 17th) to do all that? Thanks for any info.

Actually, Monday is the 18th, and yes.

Do get back to us about what retirement plan you have set up for the business and your "inventory" of traditional IRAs. Not that it's necessary for information here, but why in the world haven't you discussed this with your CPA?

Phil
Rule Your Retirement Home Fool

Print the post Back To Top
Author: footsox Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113150 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 9:27 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi Phil,
At this point, we have NO traditional IRA accounts, including SEPs, SIMPLEs and rollovers from employer plans. This is part of my confusion. Most of the info in publication 590 refers to limits if you have an existing employer plan. We do not have ANY existing IRA's, so that is part of why I posted here.

As for our CPA - we are not happy with him and part of the reason is HIS answer to this question. He has told us we make over the limit to be able to have an IRA, and I am posting here and doing research to find the "real" answer to that question, so I can fully understand it, and then perhaps we will be finding a new CPA. He basically does our taxes, but does little in the way of advice, if you know what I mean.

Can you provide me with any additional info now that I have told you we have NO IRA's presently? And what the limit is for EACH of us in opening a traditional IRA? Thanks for your help. I appreciate it.

Footsox

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113151 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 9:48 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
At this point, we have NO traditional IRA accounts, including SEPs, SIMPLEs and rollovers from employer plans.

Maybe I forgot to ask, but we also need to know if you have any retirement plan set up for the business.

Phil
Rule Your Retirement Home Fool

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113152 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 9:54 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
P.S. I won't reveal all the lovely thoughts that were running through my mind about letting things go to the last minute when it occurred to me that there's enough information for advice about what you absotively must do Monday.

Each of you needs to make a tax year 2010 contribution to a traditional IRA on Monday. The limit for each of you is $5,000, except anyone 50 or older as of 12/31/2010 can contribute $6,000. Don't fret about how to invest it. Go to your bank and open the accounts. Just plop the funds in whatever type of account as long as it's not a long-term time deposit. (If you have an established relationship with some sort of investment house and can do this in person on Monday that's fine too.)

Phil
Rule Your Retirement Home Fool

Print the post Back To Top
Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113153 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 10:09 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
At this point, we have NO traditional IRA accounts, including SEPs, SIMPLEs and rollovers from employer plans.

I'm not a tax guru but I am self-employed and can't imagine why you don't at least have a SEP. Turbotax might have done a better job for you than your CPA if he didn't suggest this.

Here's the kicker - http://boards.fool.com/can-i-put-the-roth-contributions-in-t...

File for an extension and get the SEP going(someone will chime in if this isn't still true.)

Print the post Back To Top
Author: footsox Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113154 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 11:41 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi again Phil,
No, there is no retirement plan set up for the business. Hopefully this year we'll get that going. But right now, there is nothing. Thanks.

Footsox

Print the post Back To Top
Author: footsox Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113156 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 12:06 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Hi Phil, your reply said:

Each of you needs to make a tax year 2010 contribution to a traditional IRA on Monday. The limit for each of you is $5,000, except anyone 50 or older as of 12/31/2010 can contribute $6,000. Don't fret about how to invest it. Go to your bank and open the accounts. Just plop the funds in whatever type of account as long as it's not a long-term time deposit. (If you have an established relationship with some sort of investment house and can do this in person on Monday that's fine too.)

I think I am still back to my original question -- What are the individual adjusted gross income limits if filing jointly? Or, since it is a traditional IRA, do the limit's not matter?

I apologize for not giving you a better overview to start with. We have run a small business for years and made a small living - not much money left over for any retirement plans - but always intended to catch up. Well, the past 2 - 3 years the business has increased, and we are doing quite well (fortunately). So, it is time to catch up. My problem now is that I work 7 days a week - full blast - and I apologize for the delay in my posting this message. I know I am down to the last minute, but thought you Fools could offer some advice on the limits. So, I am making a stab at getting caught up and just trying (this year) to get an IRA opened *IF* we do not make over the adjusted gross income limits.

Phil, I am sorry you have scolded me for waiting until the last minute. I am just trying to do the right thing. I could throw in the fact that I have undergone chemotherapy this past year for cancer, worked 7 days a week, and put my alzheimer's mother in a nursing home halfway across the country. But I didn't want to drone on about my personal challenges -- I was just hoping to try to get an IRA opened by Monday - If the limits do not exclude us.

Thanks for your help.

Footsox

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113158 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 12:40 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Setting up a SEP is no more paperwork than doing a traditional IRA. IF there's a reason I am giving incorrect advice, I wish someone else would chime in.

Otherwise, you are likely passing up an opportunity to contribute a lot more than $6000.

Print the post Back To Top
Author: nwvic Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113159 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 1:30 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Footsox,

You are not really being scolded - just given good advice. Open the traditional IRAs on Monday, and file an extension on your taxes. This preserves your options as much as is possible at this date.

If you are later determined to be ineligible, the money can be withdrawn. But if you miss the Monday deadline to make the deposit, there is no do-over.

Really is likely right on the sep, so file for an extension and let us sort it out when we are slightly more sane, rested, etc.

Foolish regards,

Vic
ancora imparo
learning more than I'd like to this year...

Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113160 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 1:41 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
If you have earned income - and your self-employment income IS earned income - you can make a contribution to a traditional IRA. The dollar limits are only on getting a tax deduction for that IRA contribution.

You can't contribute more than your earned income to an IRA, but that's not an issue for you.

So like Phil said, make the contributions on Monday and get the money in. Then worry about the tax deductions and investing it and converting it to a Roth IRA later.

--Peter

Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113162 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 1:50 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Setting up a SEP is no more paperwork than doing a traditional IRA. IF there's a reason I am giving incorrect advice, I wish someone else would chime in.

Otherwise, you are likely passing up an opportunity to contribute a lot more than $6000.


You're right on the money. And given the facts, it even takes the pressure off, as a SEP can be set up and funded until Oct 15 (plus a day or two if Oct 15 is a weekend/holiday).

--Peter

Print the post Back To Top
Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113163 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 1:58 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Can anyone comment on the Susie Orman suggestion of opening a traditional IRA and then converting to a Roth IRA?

We started non-deductible contributions a couple of years ago, knowing that we would be able to convert in 2010. My husband's TIRA was converted in 2010. I am delaying converting mine because of a deductible IRA.

Do you know where you would like to open the IRA? Most financial institutions allow opening of an account online. On tax day, offices maybe overwhelmed by procasinators.

Print the post Back To Top
Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113164 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 2:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 7
Do you know where you would like to open the IRA? Most financial institutions allow opening of an account online. On tax day, offices maybe overwhelmed by procasinators.

I would strongly advise AGAINST opening an IRA online on 4/15 (4/18). You must have the funds in the possession of the custodian by the deadline and if there is any screwup in the online application, by the time you find out, it will be too late to rectify.

Better to go into your local bank and open the IRA by funding a simple savings account. Then when the dust settles, you can open an IRA account wherever you want and request a trustee to trustee transfer.

Ira

Print the post Back To Top
Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113165 of 120806
Subject: Re: IRA limits? Date: 4/16/2011 2:14 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Better to go into your local bank and open the IRA by funding a simple savings account. Then when the dust settles, you can open an IRA account wherever you want and request a trustee to trustee transfer.

Ira


Many banks are open on Saturday, it could be done today.

Print the post Back To Top
Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113183 of 120806
Subject: Re: IRA limits? Date: 4/17/2011 4:37 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 10
At this point, we have NO traditional IRA accounts, including SEPs, SIMPLEs and rollovers from employer plans.

OK, here's what I would suggest as a plan.

As has been mentioned, the only critical close date is Monday April 18. You and your wife can each open a traditional (not Roth) IRA for $5,000 each for tax year 2010, but it must be done tomorrow. Your 2010 income is too high for Roth contributions, but there is no income limit for traditional IRA contributions. (Pub 590)

Tomorrow is also the deadline for filing and paying your 2010 tax. I would recommend that you file Form 4868 to get an automatic extension to October 17. It would also leave open the possibility of SEP contributions for tax year 2010, which can be made through the extended due date of your return. (I'm not sure whether you can make SEP contributions beyond the due date if you haven't secured an extension.)

If an extension doesn't appeal to you go ahead and file, including Forms 8606 (one for each of you) showing the contributions as nondeductible in Part I. You can then do a "Suze Ormond" and convert to Roth with no tax consequence. An alternative would be to deduct your IRA contributions on your 2010 return. Since neither of you was covered by a retirement plan in 2010 your contributions are fully deductible if you so choose. If you later decide to convert the conversion would be taxable income in the year of conversion. (You can amend your return later to change the treatment of the IRA contributions, so your decision now is not irreversable.)

Once the immediate time pressure is off I recommend you spend some time thinking about the future. I gather from your posts that your business is finally perfoming in a way that gives you some cash to invest. If you're like most people you're going to need more than what you can accumulate in IRAs to have a comfortable retirement. I suggest you spend some time boning up on the retirement plan options available to small businesses in Publication 560. Then a session with a fee-based financial planner with nothing to sell, to give you some advice on how to set and reach your goals for retirement and any major events before then.

Phil
Rule Your Retirement Home Fool

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: footsox Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113209 of 120806
Subject: Re: IRA limits? Date: 4/19/2011 1:57 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks Phil. I appreciate it. We opened the traditional IRA's and had already filed the extension anyway, so we got it done with your help and advice. I'll be looking for a fee-based financial planner next. Our CPA is probably going to be replaced also. Thanks again. We got the IRA's opened by the deadline, so are doing good so far. I appreciate your good advice and the advice of everyone on this board.

Footsox

Print the post Back To Top
Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113211 of 120806
Subject: Re: IRA limits? Date: 4/19/2011 8:22 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I appreciate your good advice and the advice of everyone on this board.

Thanks for the chuckle. It's not often I regret spending the time to post.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (18) | Ignore Thread Prev Thread | Next Thread
Advertisement