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.
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).
- 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.
- 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.
I hope I have helped with your concerns and questions.
- 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.
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.
Hello. Can you please refer me to the relevant tax code that states that capital gains are not considered earned income for IRA contribution allowances? I am aware that dividends and interest are not considered earned income, but capital gains I needed to do further research on their categorization. Thank you for your help.
(A)The term “earned income” means—(i)
wages, salaries, tips, and other employee compensation, but only if such amounts are includible in gross income for the taxable year, plus
the amount of the taxpayer’s net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer by section 164(f).
"(a)Net earnings from self-employment The term “net earnings from self-employment” means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business," See https://www.law.cornell.edu/uscode/text/26/1402#a
A trade or business is where you produce goods and/or services with the intention of making a profit.
Buying and selling stocks is not a business in that sense, it is merely managing your investments, making it in the same category as dividends and interest.
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