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themadanimator
Level 2

Employer started 401k 2020 does that affect 2019

My wife's employer started a 401k for 2020 but didn't offer one in 2019. For purposes of TT 2019, it's asking if I or my wife are covered by a retirement plan at work. Is this considered "covered by a retirement plan" even thought it wasn't available last year? (can she still open an IRA and get the deduction for 2019)

 

Also, I am self employed and have a SEP.  Is this considered "covered by a retirement plan?" I have actively contributed to it in 2019.

 

2 Replies
macuser_22
Level 15

Employer started 401k 2020 does that affect 2019


@themadanimator wrote:

My wife's employer started a 401k for 2020 but didn't offer one in 2019. For purposes of TT 2019, it's asking if I or my wife are covered by a retirement plan at work. Is this considered "covered by a retirement plan" even thought it wasn't available last year? (can she still open an IRA and get the deduction for 2019)

 

Also, I am self employed and have a SEP.  Is this considered "covered by a retirement plan?" I have actively contributed to it in 2019.

 


1) No.  What happens in 2020 has no effect on 2019.

2) Yes, a SEP is covered by a retirement plan.

**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.**
DanaB27
Expert Alumni

Employer started 401k 2020 does that affect 2019

Yes, you are considered "covered by a retirement plan". Your wife is not covered for 2019 but she will be covered for 2020.

 

 

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

  • Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;
     
  • IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or
     
  • Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

IRS Are You Covered by an Employer's Retirement Plan?

 

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