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Saint Timothy wrote: My wife will be filing 2 Schedule C's this year with no W2 income. The total net (line 31) for both together will be negative, with one of them showing a net profit and one a net loss. Will she be able to take her full allowable Roth contributions against the Schedule C with the net profit, or will she not be allowed to contribute to a Roth since her total net will be negative?

She has done monthly automatic contributions to her Roth fund this year. So if the answer to the above is "No - she can't contribute to a Roth", what must she do with those contributions?

She would not qualify to contribute to an IRA, including the Roth, based on her own compensatiion. But a spouse is not required to base her contribution on her own compensation. If she files a joint return, she can contribute based on the earned income of her husband. As long as Saint Timothy's taxable compensation is equal to or greater than both of your IRA contributions you will have fulfilled the "earned income" requirement for the Roth.

If however, you have retired, or are on sabaticul, or your income is not taxable due to the foreign earned income exclusion, the answer may be that "'No - she can't contribute.'" Then, you should contact your Roth provider, explain the situation, and ask for a withdrawal of the excess contribution and the earnings on the same. Tax (in 2003)and a possible 10% penalty is due on the earnings. Correction due by April 15.
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