How do I by-pass the TT software to deduct $7,000 for my IRA contribution if this amount of income was NOT earned while covered by a retirement plan at work?

[galvinm805-gmail]

After I retired, I earned income as in independent consultant.

[VolvoGirl]

If you have self-employment income you can only contribute up to your net profit reduced by the deduction allowed for the ER portion of your self-employment taxes. See IRS publication 590A page 6 about self employment income (it applies to both Traditional and ROTH IRAs)
https://www.irs.gov/pub/irs-pdf/p590a.pdf

So you need to fill out schedule C and have a Net Profit to show earned income to make a IRA contribution.  

[Opus 17 · Accepted solution]

If you are covered by a workplace retirement plan at any time during the year, you follow the IRA contribution eligibility rules for the entire year.  There is no way to say that certain dollars were earned after your retirement and follow different rules.  You are covered by one set of rules for the entire year.

If you can't make a deductible IRA contribution due to your other income from the covered job, you can still make a non-deductible contribution. This creates a taxable basis in your IRA that you must keep track of, but that portion of your money won't be taxed when you withdraw it in retirement. 

[fanfare]

maybe you don't want the hassle of an IRA basis.

In that case, you'd have to treat the $7,000 as an excess contribution and ask the custodian to remove it plus any earnings on that money. The form is called "removal of excess".

@galvinm805-gmail 

[galvinm805-gmail]

Thank you all for your replies. I finally figured out that I had checked off a box indicating that my post retirement income included a retirement plan—once I unchecked that box I was good to go.

[Critter-3 · Accepted solution]

If you have a W-2 that has the retirement box 13 checked then you were covered by a retirement plan for some part of the tax year thus your ability to deduct an IRA contribution can be limited and the program does the calculations automatically and you cannot override this situation.