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Author: SABOB Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: SEP and IRA Date: 4/9/2008 10:56 PM
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I have fully funded a SEP for 2007. I also have a rollover IRA containing contributions from a civil service retirement plan prior to self-employment.

With no income other than pension and my own self-employment (spouse does not work), are additional contributions allowed prior to 4/15 to my existing IRA and/or a new one for my spouse? Objective is to maximize amount of untaxed contributions for the 2007 tax year as I have some spare cash.

Thanks.
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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: 100166 of 121572
Subject: Re: SEP and IRA Date: 4/9/2008 11:29 PM
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I have fully funded a SEP for 2007. I also have a rollover IRA containing contributions from a civil service retirement plan prior to self-employment.

With no income other than pension and my own self-employment (spouse does not work), are additional contributions allowed prior to 4/15 to my existing IRA and/or a new one for my spouse? Objective is to maximize amount of untaxed contributions for the 2007 tax year as I have some spare cash.


You can both contribute to IRAs for 2007 if you do so by 4/15/2008. Since your SEP contributions make you "covered" by a retirement plan, whether or not traditional IRA contributions will be deductible depends on your income. The income tests are different for each of you.

See IRS Publication 590.

Phil

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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: 100168 of 121572
Subject: Re: SEP and IRA Date: 4/10/2008 8:03 AM
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Adding to Phil's comment...

Whether you can make an additional contribution to YOUR IRA depends on what you meant by "fully funded a SEP". If you meant that you contributed the maximum amount based on your net self-employment income, then Phil's advice is correct. If you meant that you also contributed the $4K/$5K "employee"-side contribution, then you cannot contribute anything more to your IRA.

Either way, your wife may make a contribution to her IRA.

Ira

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Author: SABOB Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100175 of 121572
Subject: Re: SEP and IRA Date: 4/10/2008 9:19 AM
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Thank you for the answers. I did mean that I had only made maximum contribution to SEP based on self-employment.

I reviewed the IRS publication. My AGI for 2007 was $105,000, or $2000 over cutoff for married filing jointly. Two questions:

1. Is that $105,000 AGI reduced (for deductibility of IRA contribution purposes) by my contributions to the SEP (thus bringing me under the $103,000 limit)?

2. May I now contribute the $5000 for 2007 (I'm over 50) to my existing rollover IRA and may my wife open an IRA for 2007 and contribute $5000 (she is also over 50)?

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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: 100176 of 121572
Subject: Re: SEP and IRA Date: 4/10/2008 9:39 AM
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My AGI for 2007 was $105,000, or $2000 over cutoff for married filing jointly. Two questions:

1. Is that $105,000 AGI reduced (for deductibility of IRA contribution purposes) by my contributions to the SEP (thus bringing me under the $103,000 limit)?


There's something wrong with the question. AGI is a specific number, and it reflects the deduction for the SEP contribution. So, if your AGI is as stated, you don't qualify to make a deductible traditional IRA contribution. You do, however, qualify to make a Roth IRA contribution of $5,000 for 2007.

2. May I now contribute the $5000 for 2007 (I'm over 50) to my existing rollover IRA and may my wife open an IRA for 2007 and contribute $5000 (she is also over 50)?

Your wife qualifies for either a fully-deductible $5,000 traditional IRA contribution or a nondeductible $5,000 Roth contribution.

Phil

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Author: SABOB Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100182 of 121572
Subject: Re: SEP and IRA Date: 4/10/2008 11:35 AM
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Yes, I apologize for the AGI error which is now clear to me.

Thanks for the information re my wife's ability to contribute to an IRA. We have never faced this issue before and I appreciate the help.

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