@williamthe5thc wrote:
I have two box 12 items one is for my Roth IRA contributions, and one is for my traditional IRA contributions made from my paycheck. My employer also contributed to the plan with discretionary funds and matching funds to the traditional 401k. Did I do this wrong or interpret it wrong? I entered the box 12 (both of them) into turbo tax and entered in box one as instructed. Box 1 is box 3/5 minus box 12a (flag D which is elective deferrals to a section 401k cash or deferred arrangement. … it continues on)
did I misinterpret this?
im just trying to stay within 133% of federal poverty limit.
This can be a confusing situation because there is something new in employee retirement.
Formerly, any employee payroll deductions were made to a "qualified retirement plan" sponsored by your employer. This might be a 401(k), a 403(b), a 457(a), a pension, or one or 2 other esoteric flavors of retirement plans. These plans are NOT IRAs, and you should avoid calling them IRAs. Although they have a similar purpose, they are controlled by different tax laws and have some very different rules. Within a 401(k) or 403(b), you can have a traditional pre-tax option or an after-tax Roth option, but this is still not any kind of IRA.
However, there is a recent change in the law, and some employers are actually contributing to an employee's IRA. In this case, the payroll deduction is after-tax, but the money can be deposited in a pre-tax IRA. The IRA is a private account owned by the employee, and not sponsored by the employer. Even though the employer takes a tax deduction, it is treated as if the employee paid the IRA out of pocket. (This is similar to an employee savings program where the employer deducts part of the employee's pay and deposits it to a savings account or broker account instead of a checking account.) In this type of arrangement, the employee does report a deductible IRA contribution on their tax return as if they made the contribution themselves.
It's important to understand that in this new arrangement, the money is deducted by the employer after tax, and is being contributed to a private IRA in the employee's name and not a qualified plan sponsored by the employer. The contribution limits for this type of arrangement are also much lower. I suppose this type of plan puts less burden on the employer since they are not sponsoring a retirement arrangement. The employer is "helping" the employee contribute to the employee's own private IRA.
So before we can definitely tell you what to report, you need to tell us what is actually happening and what code letters are in your box 12. Are you contributing to a qualified employer sponsored plan (pre-tax or Roth option or both) or are you actually contributing to an IRA via one of these new arrangements?
