@melissaforpeace315 wrote:
@Opus 17 Thank you so much for this information! So if it is the case that I contribute to my Roth IRA for the 2021 year (not the 2022 year) and proceed to file my taxes before 4/15/2022, and so happen to run into an error with TurboTax being able to recognize take-home pay from being a TA as being "compensation", then what are my options? Will I thus be penalized by the IRS for contributing to my 2021 Roth IRA?
Also, I presume that it's not too late to contribute to my 2021 Roth IRA, correct?
You can contribute to a Roth IRA for tax year 2021 up until April 15, 2022. Just make sure you inform the trustee that this is a 2021 contribution. It may be a simple checkbox if you contribute online, or there may be a different procedure, but don't let it default to 2022. Don't wait until the last minute, since it may take a few business days to process.
If you have compensation as defined by the IRS, you won't be penalized for contributing to a Roth IRA. Compensation is defined in Table 1-1 here,
https://www.irs.gov/publications/p590a#en_US_2020_publink1000230983
You are not required to enter your Roth IRA contributions on your tax return at all. The IRS will do the checking in their computer systems over the next couple of years and they will contact you if they think there is a problem (if they think you do not have "compensation", they will send a letter and you would have a chance to reply with proof). It is recommended that you enter your Roth contribution in turbotax because Turbotax can verify your eligibility and check for a saver's credit. But if Turbotax gives you an error because it does not understand your income to be compensation (but you are sure it is compensation) then you can just take the Roth contribution back out to clear the error, since it does not have to be reported.
