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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 125003  
Subject: Re: SEP, Traditional IRA, & Taxes Date: 6/12/2000 2:32 PM
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<< My employer and I have reached an agreement on a salary increase for me. My base salary increases $5,000 to $45,000 staring 7/1/00, and a $2,500 SEP-IRA will be created. My questions are:
1) Is a SEP-IRA considered income, therefor taxed? >>


<< 2) Does it make a difference when the SEP-IRA is created? >>

I'm not sure what you mean by this question. There are time limits for each year's contributions, but other than that it doesn't matter when the account is created.

<< 3) I have been making contibutions to my own traditional IRA, will I still be able to have a tax deduction for year 2000? >>

Assuming that a SEP contribution for year 2000 will be made, maybe. The SEP constitutes a retirement plan, which makes your traditional IRA contribution subject to the AGI phaseout. You exceed the top of the phaseout range if you're single. You don't if you file a joint return and you have little other income between you.

<< 4) If no deductions are allowed, should I turn my existing traditional IRA into an Roth IRA? The funds have been beaten down, so I think the tax will be less. >>

If you can't deduct traditional IRA contributions, definitely consider making your year 2000 contribution to a Roth, assuming your AGI allows. (Again, this depends on filing status.) If you convert your existing traditional IRA to Roth, the value as of the date of conversion will be taxable income to you in the year you convert.

There is no requirement that you convert your existing IRA to Roth in order to make contributions to a Roth.

Phil Marti
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