348793
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

rftulie
New Member

95% of 2018 income from employers who didn't offer retirement plans. Can I use a traditional IRA for that income? Turbotax won't let me deduct 1 cent d/t the other 5%.

 
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Reply
DanielV01
Expert Alumni

95% of 2018 income from employers who didn't offer retirement plans. Can I use a traditional IRA for that income? Turbotax won't let me deduct 1 cent d/t the other 5%.

It is how tax law is written.  What you state makes sense, since you didn't have access to a retirement plan where you worked before.  Unfortunately, tax law turns a blind eye to this because your deduction is based on your AGI and not on how much time throughout the year you didn't have access to a retirement plan in the year.

If you have already made the contribution, and your income is low enough to allow you to contribute to a Roth-IRA, you may wish to consider recharacterizing the original contribution to a Roth IRA.  Recharacterization means that the original Traditional IRA contribution just became a Roth IRA contribution, allowing all of the growth to be Roth-IRA growth as well. If you do this by April 15th, the contribution will be considered a Roth IRA contribution for 2018.

But if your income is too high for a direct Roth contribution, you may still turn it into a back-door Roth.  Instead of recharacterizing the contribution, you convert the IRA to a Roth-IRA.  Any growth will be taxable on your tax return next year (a conversion is reported as a taxable event in the calendar year it occurs as compared to the recharacterization, which can be done up until April 15th of the following year), but it will be in a Roth IRA, where all remaining growth is tax-free upon distribution (provided that it is a qualified distribution:  held at least 5 years and after age 59 1//2 or other qualified reason).

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Unlock tailored help options in your account.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question