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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121450  
Subject: Re: Roth IRA - 1099 and Fellowship Income Date: 2/9/2009 1:44 AM
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poortaxed writes (in part):

My wife and I both had legitimate Roth IRA's from 2007. She made about $9000 in Box #7 on a 1099-MISC. Most of that (about $7600) was deducted for business expenses for her.

Does the entire $9000 count for her Roth Contribution or only what is left after deductions?


I reply:

Let me restate this so that I'm certain I understand it. Your wife had approximately $9,000 in revenues from self-employment in 2008. Later in the thread, you mention $2,500 in sales. I'll assume that's self-employment revenue as well.

To generate this revenue, your wife had approximately $7,600 in deductible business expenses. Presumably, you haven't yet filed your return for 2008.

If you deduct the expenses, then you and your wife have overcontributed to your Roth IRAs. But except for the self-employment tax, I don't think there's any requirement that you deduct business expenses. You're allowed to, but if you think it's to your advantage not to, I believe you can get "credit" for the additional taxable income.

So the question is, is the extra tax liability worth it to you in order to more fully fund your Roth IRAs? That's a question no one here can answer for you. --Bob
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