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Hello,

Here is my situation -- I am getting ready to pay my 2000 taxes...finally I have the money for it. My State W2 has an "X" marked under pension plan. This W2 is from a company that I quit on 01/14/00. This company was contributing 2% of my income to a pension plan. I had not made any contributions to it during my years with the company. The company had informed us that we were eligible for 100% of the company's contribution if we were employed for at least 7 years or 20% after 3 years. I quit after 4.5 years. Now I have a 2000 IRA that I am trying to deduct and my accountant is not letting me do this.

My question is -- Am I considered "participating in a plan" when I have never contributed to the plan and also the fact that I had worked only for 14 days with the company in 2000.

Hope I have not confused you.

Thanks for your help!

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My question is -- Am I considered "participating in a plan" when I have never contributed to the plan and also the fact that I had worked only for 14 days with the company in 2000.

You may not have been making contributions yourself, but you were covered by a retirement plan. If you're covered on any one day of a tax year, your traditional IRA contribution can be deducted only if you meet the AGI limits.

IOW, your accountant is right. You can confirm it in Publication 550.

Phil Marti
VITA Volunteer
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You may not have been making contributions yourself, but you were covered by a retirement plan. If you're covered on any one day of a tax year, your traditional IRA contribution can be deducted only if you meet the AGI limits.

I'm going to have to ask a question of you here Phil. This sounds like a defined contribution plan, not a defined benefit plan. We need a little more info. If he didn't contribute to the plan and no contribution was made on his behalf, isn't a deductible IRA still allowable? Of couse, if contribution were made and lost because he was not vested, he can't. Is that correct?
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If he didn't contribute to the plan and no contribution was made on his behalf, isn't a deductible IRA still allowable? Of couse, if contribution were made and lost because he was not vested, he can't. Is that correct?

That's how I read the discussion on page 8 of Pub 590, with the nitpicky addition that the IRA contribution may be deductible if AGI is within the limit.

Phil Marti
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If he didn't contribute to the plan and no contribution was made on his behalf, isn't a deductible IRA still allowable? Of couse, if contribution were made and lost because he was not vested, he can't. Is that correct?

That's how I read the discussion on page 8 of Pub 590, with the nitpicky addition that the IRA contribution may be deductible if AGI is within the limit.


Thanks Phil.
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