2024 W-2 box 13 retirement plan is marked

[lajz]

My wife and I both retired several years ago and are over the age of 70 now. We both receive social security and I receive a pension monthly payout from my former full time employer. A few years back after retiring I began a part time job. Over those years this part time company had and still has a retirement plan of which I've never participated. Up until this tax year 2024 this employer has not checked box 13, retirement plan. This tax year for the first time box 13 'retirement plan' was checked. In 2024 my wife and I both contributed to our personal Traditional IRA's believing that our contributions will be deductible. When I completed our joint return Turbo Tax indicated that only my wife's contribution was deductible.  Since I manually entered the information from my W-2 I went back an unchecked box 13 'retirement plan' to see if this made a difference and it did, TurboTax allowed me to deduct both my wife and my Traditional IRA contributions. This made a significant impact on both our Federal and State tax liabilities. Why would checking and unchecking box 13 retirement plan make such a difference? 

[lajz]

Note that in the above question I posted,  my wife will turn 71 in March of 2025 and I will turn 73 in June of 2025.  I'm not sure whether this makes a difference.   

[AmyC · Accepted solution]

The issue is that the employer is supposed to check the box that a retirement plan is available, regardless of your participation. This checked box does affect your deductible IRA contributions. You can either:

• roll it to a ROTH, 
• pull it out or
• file form 8606 for the traditional IRA basis.

Your age means that you won't have any penalties on the income earned since the deposit if you take it out or roll it over.