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Level 1

Ira contribution agi earned income

This may be my last time using TurboTax. I am very frustrated. First call: 40 minutes on hold, describe the problem, then told she can't help me and will transfer me to an expert. Told phones are jammed and I will get a call back in 10 minutes. Received callback but there was no one there and I was disconnected. Called back again. Spent 10 minutes trying to navigate through the automated system, then was on hold for another 40 minutes. Again, described the problem and was told they could not help me but will transfer me to another expert. Told I would get a callback in 14 minutes. I did and described the problem, AGAIN. She tried to help me but could not and decided I needed a tax expert to solve the problem. Transferred again. This time Intuit want another $60 for me to talk to an expert. The problem? Enter an IRA contribution of $6000. Turbotax tells me my AGI of $128k does not fall between $118k-$133k to qualify. Also states my earned income is -0-. How can I have an AGI of $128k and an earned income of 0? Also, as I continued on I can across a page telling "you might be able to deduct $5500 with an IRA contribution" What the hey? On one page Turbotax tells me I can't make a contribution and on another page, most likely advertising to get more money from me when I open an IRA through Mint.com. they tell me I can. This seems to be a problem with Turbotax. And Intuit wants to charge ME to fix the problem? I think I've had it.


6 Replies
Level 7

Ira contribution agi earned income

I realize your frustration and I understand, please accept my apologies. 

First, let me explain the difference between earned and unearned income.

Earned Income is wages, net earnings from self–employment, certain royalties, honoraria, and sheltered workshop payments. Basically money earned by services you perform. 

  • Earned income is required to be able to put any money into an IRA.

Unearned Income is all income that is not earned from your services, such as Social Security benefits, pensions, unemployment benefits, interest income, dividend income, and capital gains.  

  • This is not considered when determining if you can put money into an IRA.

What can you contribute to your IRA for 2017?

For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than: $5,500 ($6,500 if you're age 50 or older), or your taxable compensation for the year, if your compensation was less than this dollar limit.

What amount of your contribution can you deduct for 2017?

This depends on whether you are in a covered pension plan at work (check your W2 box 13).  

  1. If you are in a covered plan your deduction starts to phase out when your modified adjusted gross income is more than $99,000 but less than $119,000.  Over this amount there is no deduction.
  2. If you are NOT in a covered plan your deduction starts to phase out when your modified adjusted gross income is more than $186,000 but less than $196,000. Over this limit there is no deduction.
  3. IRA Deduction Limits

I hope I have helped with your concerns and questions.

Level 1

Ira contribution agi earned income

Thanks for your response, but it does not answer the question. Why does Turbotax not recognize k-1 income as earned income? I am self employed. In lieu of salary I take dividend payments for my hours worked. Yet this is NOT considered earned income? Your answer states "money earned by services I perform". I was paid for services performed via a k-1. Copied from the "learn more" link on the page telling me I cannot contribute; " You can make a partial Roth IRA contribution if your modified AGI falls within:
- 118,000 to 133,000 for all other filing statuses (single)"

That is where my income falls.

Your answer also does not address the second part of my question regarding the later "advertising" that I may be able to contribute to an IRA if I start one via Mint.com. Why is Turbotax telling me on one screen that I cannot contribute, and on another telling me I might be able to? It seems Intuit, who owns Mint.com, is just trying to get my money to open an IRA when it has already told me I can't. To me this is not good salesmanship.
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Level 7

Ira contribution agi earned income

@markspersonaltax If your K1 shows dividends as your payment, then you can't consider this earned income.  This is the tax law.  The tax return will not recognize this is money paid for services, but rather investment income.  You would have to be paid a salary to have earned income. This may help you plan for 2018 and beyond.
Your question didn't indicate a Roth IRA contribution so my answer did not address this fully. You are correct in that the Roth IRA contribution starts to phase out between the income levels of > $118,000 but < $133,000 for single.
None of this is relevant if you don't have "earned income" for IRA purposes.
Level 7

Ira contribution agi earned income

@markspersonaltax In response to your questions in TurboTax about the IRA, maybe you could post the two different screens here  --do not show any personal information-- because I personally have not run into that. That being said, TurboTax is designed to help everyone so it's not tailored to a specific situation when it comes to tax savings - its a general statement to help everyone who may not consider it.
Level 1

Ira contribution agi earned income

Need some clarification on the case of married filing jointly where one spouse is working, covered by a retirement plan and has earned income, and the other spouse is not working, getting Social Security and/or pension, and has no earned income. Can spouse with no earned income contribute to an IRA? Is the "Kay Bailey Hutchison Spousal IRA Limit" in effect? In the case of @markspersonaltax if there's a spouse with earned income it seems this would apply and allows contributions.
Level 1

Ira contribution agi earned income

My spouse has income.  I have income.  Our earned income exceeds the contributions.  Turbotax is claiming we have excess contributions.  How do I fix it?