Question by phxsunsfanaz: What do you do when you make Roth IRA contributions for a year in which your annual income exceeds the limits?
Let’s say a couple made Roth IRA contributions for 2005 in Feb 2005. In 2006, they realized that their 2005 income was much higher than they originally expected and exceeded the $ 160K limit for couples. What are the options available now to undo it?
Best answer:
Answer by ThaneTheBrain
You better talk to a tax person. If you’ve filed already, and took the deduction, then you’ll have to amend. But if you went to file and realized your mistake, they can help you back out your money.
What do you think? Answer below!
Question by B. Cummings: Does how much you contribute into a roth IRA, take that much away from your taxible income?
For example if I contribute $ 2000 into a roth IRA, and had a taxable income of $ 35,000 would it now be $ 33,000 of taxible income?
Best answer:
Answer by engineer50
No. Roth contributions are made with after-tax dollars. There is no deduction from income.
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Question by rainfingers: Why is there an upper income limit for contributing to a Roth IRA?
People over a certain income are not allowed to make any contributions to a Roth IRA. Why? Wouldn’t people with high income rather pay the taxes later anyway (as they would do with a traditional IRA)? In other words, doesn’t this rule just prohibit people from doing something they’d already rather not do?
Mrs. F: in addition to the upper income limit, there’s also a yearly contribution limit ($ 4000 this year). But Roth IRAs are still very, very, worth it! You can always put more money in next year, and the year after that, etc. Contribute the maximum, or as much as you can, every year; you’ll be glad later.
Best answer:
Answer by Mrs F
That doesn’t sound right. We were thinking of getting one of those sometime in the winter, but we should be able to contribute all we want!
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Question by Maximus4488: Is tax on an IRA distribution that is converted to a Roth considered unearned income?
Last tax year 2009, I chose to convert $ 5000 of my kids Traditional IRA to his Roth IRA. I understand that the $ 5000 will be taxable to him. However, is the taxable amount considered unearned income to him and now subject to”Kiddy Tax” ?
Best answer:
Answer by the tax lady
Yes, it’s unearned income and subject to kiddie tax.
If it’s not on a w-2, it’s kiddie tax–that also includes IRAs, unemployment, etc.
He will have to file a form 1040 with an 8615 attached.
Give your answer to this question below!
I am a US citizen, working (since 4 years ago) as a teacher in China. I earn $40000 per year and this income is excluded from my tax return. I am taxed in China, so I presume my accountant did this exclusion for me so I don’t pay taxes in the US for this income.
I have learned that I cannot use this income to contribute to a ROTH-IRA.
My question is: should I go back on the decision to exclude this income from US taxes? This would mean I have to pay taxes on it. But it would let me contribute $5000 to the ROTH.
Which one is better to have? A ROTH with the tax free compounding that it brings, or a higher income out of which I cannot contribute to a ROTH (but I can contribute to other, taxable vehicles)?
Thank you!
Question by roth: When calculating income for Roth IRA eligibility, do capital gains count toward the total?
I know about the 99k-114k phaseout for single filers in 2007. So for example, if you made 90k in salary and had 25k in capital gains would you be able to contribute to a Roth IRA?
Best answer:
Answer by Spock (rhp)
capital gains do count
see IRS Pub 590 for the details of how to modify AGI for this calculation
http://www.irs.gov/publications/p590/ch02.html#d0e9254
What do you think? Answer below!
Question by jekelnHide: Foreign earned income exclusion and Traditional IRA to Roth IRA conversion taxes/ capital gains?
I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?
Best answer:
Answer by Jss
How can you have negative income unless you have loss from business or capital loss?
Just making sure that you are doing Form 2555 correctly.
Yes, it is always better to withdraw from IRA only when you have minimum income
For articles on your U.S. tax return, http://taxipay.blogspot.com/2008/04/list-of-articles.html
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Question by Clutchitude: Can I contribute to a Roth IRA if my earned income is outside the US?
I have both earned and unearned (dividend, investment, interest) income. My earned income is excluded from my US tax return since I’m physically outside the US. Can I still contribute to a Roth IRA?
Thanks, I thought so. I also assume I have to exclude either all or none of my foreign-earned income if it’s below the threshold.
Best answer:
Answer by Rob
Under the circumstances you have described No you cannot contribute to a Roth or a Tradional IRA
If your Foriegn Earned Income is excluded from your Tax return, it is not considered earned income for the purposes of contributions to either a Traditional or Roth IRA. You can only contribute if the earned income is taxable income.
See Publication 590
Who can contribute and the definitions of what is considered not taxable compensationhttp://www.irs.gov/publications/p590/ch01.html#d0e1025
Add your own answer in the comments!
I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?
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