Can we make deductible IRA contributions in 2022 if our only 401k deposit in 2022 was employer match earned 2021 ? Spouse has earned income in 2022, I was laid off 12/31

[barry29]

My employer terminated me 12/31/2021 but deposited my annual match in Jan 2022.  I need to know if this allows me to claim I am "not covered by an employer-sponsored retirement plan" for 2022, so able to make deductible IRA contributions in 2022. Spouse still earning income in 2022 but may be too high to get T-IRA deduction. She does NOT have an employer retirement plan, I had until end of last year.

[DavidD66]

If you were terminated on 12/31/2021, you are not covered by a "retirement plan" in 2022 (unless you get job with an eligible plan).  The employer should not indicate on your 2022 W-2 that you are covered, allowing you to make deductible contributions to an IRA (assuming you otherwise qualify).  That said, the way to know for sure what your former employer is going to do, is to either ask them or wait and see what the W-2 says.

For eligibility rules for deducting IRA contributions, see the following IRS pages:

• IRA Deduction if You ARE Covered by a Retirement Plan at Work - 2022 
• IRA Deduction if You Are NOT Covered by a Retirement Plan at Work - 2022 (deduction is limited only if your spouse IS covered by a retirement plan)

[dmertz]

The answer depends on the end date of the plan year.  For example, if the plan uses a fiscal year that ends on January 31 and in January 2022 the employer contributed a matching contribution for elective deferrals that you made from income earned between February 2021 and January 2022, the matching contribution was made for the plan year that ends in 2022 and makes you an active participant for 2022.  However, if the plan instead uses a calendar year, the matching contribution would be one made for the plan year ending in 2021 and makes you an active participant for 2021.

So to determine whether or not this matching contribution makes you covered for 2022, you need to ask the employer what the end date is for the plan's year.  Hopefully it uses a calendar year and, if so, you'll be able to deduct a traditional IRA contribution.  A plan year ending in any month other than December would likely mean that you are covered for 2022.

[barry29]

As I am paid severance, in 2022, I will get a W-2 in 2023 for 2022 tax year.  That will confirm my employer’s reporting of my coverage status.  W-2 just received now, would show I am covered as the period is 2021.  But I can wait to 4/15/2023 to make my IRA contribution for 2022, once I have such written confirmation.