Here's the situation. I am retired and my wife is about to retire probably in August of 2020. We have some extra funds I want to contribute to a traditional IRA in 2020 which will give garner a refund on our joint 2019 taxes. My wife is covered by a 401k plan at work and also has two traditional IRA's while I have no IRA's of any kind. According to the IRA Calculator tool it appears I can't contribute any funds to my wife's IRA's . I can only contribute to an IRA which I would have to establish. I would have liked to put the funds in one of my wife's IRAs but that doesn't seem possible. Is this correct, do I have to open up a traditional IRA for myself and then add funds to this one?
IRAs are owned by an individual, so for you yourself to make a contribution to an IRA for 2019 (based on your wife's compensation since you have no 2019 compensation of your own) it would have to be to your IRA, not to your wife's IRA.
Given sufficient compensation, your wife is permitted to contribute to a traditional IRA, it may just not be a deductible contribution. That your contribution for 2019 would be deductible but your wife's would not be suggests that your 2019 modified AGI for the purpose is between $123,000 and $203,000.
Let me ask you one more question. I was told that contributing money to a traditional IRA from say a checking account will eventually lead to me being double taxed. Money in my checking account already had taxes taken out primarily because they were from past paychecks. If I put this money into an IRA I will have to pay taxes again on what I withdraw. Will the savings I get on my 2019 return more than offset this so called double taxation?
you do not pay taxes on the amount you withdraw from a persobnal account. you get a deduction for the contribution. under the tax laws at some point you will have to start taking distributions from the account. you will pay taxes on it.
there is an alternative - a roth IRA AGI limit $193,000
makimum contribution for non-working spouse $6,000
the reason i suggest aroth - which is not deductible but following its rules would make any distrubtion fully non taxable
Withdrawals of earnings are free from federal income tax, provided the Roth IRA has been in existence for five years and you are at least 59½.
Contributions can be withdrawn anytime without federal income taxes or penalties.
RMDs (Required Minimum Distribution) are not required.
Distributions for your beneficiaries are tax-free.
the thing with regular IRAs is they sve taxes now but closer your are to having to take distributions (probably age 72 under the new laws) the less time for earnings to accumualte on them before distributions must start and you end up paying back the taxes . whereas for a ROTH no tax savings butyou never have to take them out. If you do and meet the 5 tear rule they're fully non yaxable.
If I open up a Roth IRA say today I have to wait 5 years before I can use any funds in contains? Also, whatever money I deposit in the ROTH IRA would be considered income thus it would be taxed when I next file my tax forms?
No, you can take your original contributions out at any time tax and penalty free, and your original contributions come out first. See the ordering rules for Roth IRA distributions:
Once you have reached age 59½ and at least 5 years from the beginning of the year for which you first made a Roth IRA contribution, all regular distributions from your Roth IRAs are qualified distributions, tax and penalty free.
You do not get a tax deduction for a Roth IRA contribution. The benefit of the Roth IRA is that, once the requirements are met, all regular distributions from your Roth IRAs, including earnings in the Roth IRAs, will be tax and penalty free.