@smokyriver wrote:
The permitted Roth contribution for 2019 is 7000 if you are over 65; I am over 65; my schedule C income was over $10,000 with over $500 in W2 income, so my total earned income was way higher than $7,000. Therefore on April 2, I contributed $7,000 to my Roth for 2019; but when I put $7,000 into field for Roth Contributions in 2019 TTax it calculated that $3,500 was "disallowed" and added tax on this. Why is $3,500 disallowed under this circumstance?
It is your net self-employed income minus the deductible part of the SE tax. Usually Schedule 1 line 3 minus line 14 plus W-2 box 1 minus W-2 box 11. Your total MAGI must also be under the limit. You also cannot file a Married Filing Separate tax return or the MAGI limit is $10,000 if you lived with your spouse.
The most you can contribute to all of your traditional and Roth IRAs is the smaller of:
For 2018, $5,500, or $6,500 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.
For 2019, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355
See this IRS article for Roth contribution limits:
https://www.irs.gov/retirement-plans/roth-iras
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
