You'll need to sign in or create an account to connect with an expert.
Since you had a 401K anytime in 2021 then even that you can make a full IRA contribution the amount you can deduct on the return MAY be limited.
See these IRS IRA deduction limit charts.
If *you* are covered by a retirement plan:
https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-i...
If you are *not* covered but your spouse is:
https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-i...
No, sorry.
However, you can open a solo 401(k) as a small business person (your schedule C consulting job).
https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people
(Note that you can't have a "gig" with a 401(k). You would have to be a W-2 employee. You might have left that job to work on your own, which is fine. As an independent contractor, you can't be part of some other employer's 401(k) plan because that is only for employees which you would not have been. But you can open your own 401(k). )
" the amount you can deduct on the return will be limited. "
The amount you can deduct may be limited.
It depends on what your income is.
If you don't want to track a basis for the rest of your life or the life of the IRA, don't contribute more than the deductible amount allowed.
Given the income the taxpayer reports, a deductible IRA is disallowed. The Taxpayer can contribute to a Roth IRA or open a solo (self-employed) 401k.
Thanks!
Iām not an independent contractor, I go through a middle-man (company) from gig to gig and am a W2 employee of the middle-man, which can change with each project. On one project, the middle-man provided a 401k. On my current project, they donāt. Not that this changes anything.
It sounds like maybe I should just put the money I would have put in a 401k into my Roth IRA? Does that have a limit?
That is confusing. You get a W2? Do you get 1 W2 for all the jobs? Or a W2 for each gig? You must get different W2s if one of them provides a 401K.
@SeaVik wrote:
Thanks!
Iām not an independent contractor, I go through a middle-man (company) from gig to gig and am a W2 employee of the middle-man, which can change with each project. On one project, the middle-man provided a 401k. On my current project, they donāt. Not that this changes anything.
It sounds like maybe I should just put the money I would have put in a 401k into my Roth IRA? Does that have a limit?
IRA contribution limit for tax year 2020 is $6,000 if under age 50. If age 50 or older it is $7,000
Go to this IRS website for the amount of contributions you can make on a Roth IRA in 2020 - https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that...
If you are a W-2 employee, then your options are limited. You can contribute to a Roth IRA, with a maximum of $6000 per year, or $7000 if you are over age 50, being aware of the income limit.
https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021
A Roth IRA is not an immediate tax deduction, but it may have significant long-term advantages.
You can also make a non-deductible contribution to a traditional IRA, and then roll it over to a Roth IRA. This is called a āback door conversionā, but it is an advanced maneuver and I donāt want to even try to explain the complexities. As long as your income is within the limit to make Roth IRA contributions, that would be the way to go in my opinion.
Your Roth IRA is separate from the 401(k), and contributions to one do not affect the limit of contributions to the other.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
TomDx
Level 2
fpho16
New Member
puneetsharma
New Member
ruthnattania
New Member
larryton1
New Member