Where dose it say that? For 2020 IRA contributions there is no age limit.
Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.
OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.
Under the new SECURE Act if you have earned income, there's no age cap for contributing to a traditional IRA (previously you had to stop the year you turned age 70½).
This change puts traditional IRAs on par with Roth IRAs, which never had an age cut-off.
However, contributions you make to a traditional IRA may or may not be deductible. The amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. If neither you nor a
spouse is covered by an employer's retirement plan, you can deduct the full amount. If you aren’t able to deduct contributions to a traditional IRA, contributing to a Roth may make more sense, assuming you fall under the income limits.
Keep in mind that those who are 70½ or older and making contributions to a traditional IRA, SIMPLE IRA or SEP IRA will still need to take RMDs, even if they’re still working. Required Minimum Distributions still apply to traditional IRAs at 70½ or 72 depending on your birthday.
I contributed $7000, had earned income well above that, and TurboTax said that contributions after 70 1/2 were not allowed and must have done some calculation to deduct some amount that I don't remember above $6,000.
@Anonymous wrote:
I contributed $7000, had earned income well above that, and TurboTax said that contributions after 70 1/2 were not allowed and must have done some calculation to deduct some amount that I don't remember above $6,000.
Where are you seeing contributions not allowed after 70 1/2? I just went through the IRA contributions section of the 2020 program and there was nothing that shows it is age limited.
Is your software up to date for the 2020 program? Click on Online and Check for Undates.
I'll go back into the return and see if I can find where it said that about age 70 1/2. Today is the first time I've logged into TurboTax online, so assume it is the updated version.
Some of the help text has probably not been updated, so ignore it. regardless of your age, TurboTax will treat the contribution correctly if you enter it.
I figured out what it is doing. I have a W-2 of less than $7,000 and also have a 1099 for a lot more than that. For the IRA contribution, TurboTax is only looking at the W-2 amount and saying that the rest is not allowed. Is there a solution for that issue?
This is in the help box, but it looks like the system was applying the earned income part of the limitation to me, not the age cutoff.
Excess Contributions
You won't get a deduction for your excess contribution.
You have an excess contribution to your IRA if you (or your spouse):
- Contributed more than 6,000 (7,000 if age 50 or older). This is the limit for traditional IRA contributions.
- Are age 70 ½ or older. You are not allowed to contribute to a traditional IRA.
Yea, there are several out of date help boxes but those are cosmetic and do not affect the program operation. They will be updated eventually.
Yes, thanks. I will ignore that as cosmetic. But how about the problem of the system just looking at my W-2 income and not the self-employment income?
The most you can contribute to all of your traditional and Roth IRAs is the smaller of:
For 2019 and 2020, $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, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355
@Anonymous wrote:
Yes, thanks. I will ignore that as cosmetic. But how about the problem of the system just looking at my W-2 income and not the self-employment income?
The allowable part of self-employed income would be the 1040 schedule 1 line 3 minus line 14.
I have $50,000 in self-employment income and $6xxx in W-2 income. The disallowed amount calculated by Turbotax from the $7,000 I contributed is $8xx. That is exactly $7,000 - $6xxx. That seems to be pretty good evidence that the system is not taking into account the self-employment income and that there is a problem in the software. Do you have any suggestions about how to get that addressed?
Since I mistakenly thought the problem in the calculation was with the 70 1/2 age cutoff that is no longer in effect, would it be better to start a new thread?
Again, what is on the 1040 Schedule 1, line 3 and line 14?
You have a lot of self employment income but is that also your Net Profit on schedule C? Or did you expense a lot of it?
This is lame, I know, but I can't figure out how to view the 1040.
No, unfortunately, working remotely hasn't led to many expenses. The net is over $40K
@Anonymous wrote:
This is lame, I know, but I can't figure out how to view the 1040.
You can view your Form 1040 at any time. Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.
Thank you!
The allowable part of self-employed income would be the 1040 schedule 1 line 3 minus line 14.
Schedule 1 line 3 - Business Income - is over $40K
Line 14 - Deductible part of self-employment tax -- is over $3K
You must also subtract from net profit anything reported on Schedule 1 line 14 as a self-employed retirement deduction, but with, say, $45k of net profit and a maximized self-employed 401(k) contribution there would still be a enough compensation from self-employment remaining to support $6,xxx of IRA contribution.
Note that income excluded as foreign earned is not permitted to be used to support an IRA contribution.
@Anonymous wrote:
Thank you!
The allowable part of self-employed income would be the 1040 schedule 1 line 3 minus line 14.
Schedule 1 line 3 - Business Income - is over $40K
Line 14 - Deductible part of self-employment tax -- is over $3K
I would suggest printing all forms and worksheets and view the IRA Deduction Worksheet if a Traditional IRA abs see what is on line 2 & 3 and they are in the column for you.
Or if a Roth IRA then look at the "Roth IRA Contribution Limit Worksheet" lines 5,6, 7 & 8. To see if limited.
Just thought of something else. Are you married? Be sure your W2, Schedule C and IRA Contributions are all assigned to the same person. Maybe your schedule C is listed under your spouse?
"I would suggest printing all forms and worksheets and view the IRA Deduction Worksheet if a Traditional IRA abs see what is on line 2 & 3 and they are in the column for you."
--It's a traditional IRA. I can see the whole 1040 under Preview as you instructed before. But how would I get to the IRA Deduction Worksheet?