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Ryan3
Level 3

Contribution Limits for IRA and Solo 401(k).

Hello, in planning my contributions to retirement accounts for 2019, I'm trying to make sense of TurboTax's notification to me in 2017 that I made excess contributions.

I made excess employee and employer contributions to my Solo 401(k) and withdrew the excess amounts so that the employee contributions came back down to less than 100% of my net earnings and the employer contributions to 25% of my net earnings.

However, TurboTax also stated that I had made an excess contribution that year to my Roth (I contributed $5500).  Why?  Aren't the contribution limits treated separately?  In other words, contributions to my Solo 401(k) shouldn't reduce the amount I can contribute to my Roth, correct?

Thanks!

5 Replies
macuser_22
Level 15

Contribution Limits for IRA and Solo 401(k).

Roth contribution limits are totally separate.

There are two different Roth limits:

1) You must have at least as much taxable compensation as the contribution.

2) Your MAGI must be under the it limit.

The most you can contribute to all of your traditional and Roth IRAs is the smaller of:

For 2018, $5,500, or $6,500 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.
For 2019, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, alimony and separate maintenance, and nontaxable combat pay ).

See this IRS article for Roth contribution limits:

https://www.irs.gov/retirement-plans/roth-iras

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Ryan3
Level 3

Contribution Limits for IRA and Solo 401(k).

Thank you.  Then why did TurboTax flag my $5,500 in 2017 as an excess contribution?
macuser_22
Level 15

Contribution Limits for IRA and Solo 401(k).

The IRA contribution interview would tell you the reason - either MAGI too high or not enough taxable compensation.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
macuser_22
Level 15

Contribution Limits for IRA and Solo 401(k).

You are posting from Home & Business so I assume you are self-employed.   As I said above, self-employed income must be net income after expenses minus the deductible part of the SE tax (normally half of the SE tax).
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
macuser_22
Level 15

Contribution Limits for IRA and Solo 401(k).

You appear to be using the CD/download version so you can use the forms mode to view the "Roth IRA Contribution Limit Worksheet"  that will show the reason.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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