ROTH Contribution Question

Forum|Forum|3 years ago
March 27, 2023
2 replies
2 views

Hello,

If I were to have a w2 for 50k, and a schedule C loss of 55k, can I still contribute to a ROTH IRA?

I have FICA taxes paid on the W2 income, so I am thinking maybe that still constitutes earned income available - whereas the Sch. C loss never had FICA taxes taken from it.

Also, if you can provide where you found the information, I would appreciate that, so I can read up on it.

Thank you for your help!

Best answer by dmertz

The answer provided by JulieS is incorrect. Your Roth IRA contribution is in no way limited to MAGI. Yes, you can contribute to a Roth IRA. The amount of compensation reported in box 1 of the W-2 supports a Roth IRA contribution regardless of any Schedule C loss. Upon entering a Roth IRA contribution into TurboTax, TurboTax will not flag the Roth IRA contribution as an excess contribution (provided that your MAGI for the purpose is not so high that the amount that you are eligible to contribute to a Roth IRA is limited.

See IRS Pub 590-A page 6, "What is Compensation?" where it says that the amount in box 1 of your W-2 minus any amount in box 11 is supporting compensation.

JulieS

Level 15

No, you can't contribute to a Roth based on the scenario you describe.

Even though you have some earned income (wages) to justify your contribution, you are also limited to no more than you Modified Adjusted Gross Income (MAGI), which in this scenario is negative ($5000).

Click here to see the applicable IRS worksheet and additional information on this topic.

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JKCPAAuthor

Level 2

I went through the MAGI worksheet, and it looks like that worksheet calculation is just to compare MAGI to the limits based on filing status? I did not read any AGI limitations based on the worksheet, just if it is under MAGI, then you are allowed.

dmertz

Level 15

@JKCPA , yes, that is what that worksheet is for. There is no minimum MAGI that you must have to be eligible to contribute to a Roth IRA. You could even have a negative MAGI and would still be eligible to contribute based on the amount in box 1 of your W-2.

dmertzAnswer

Level 15

See IRS Pub 590-A page 6, "What is Compensation?" where it says that the amount in box 1 of your W-2 minus any amount in box 11 is supporting compensation.