IRA withdrawals and deposits.

[dj21108]

My spouse retired last year (in November), and we needed a little more income, but I took out too much.

Can I make a deposit to lower 2021's AGI by April 15 even though we took a withdrawal?  Does it matter whose account we deposit it in?  It will be easier for me to deposit it in mine.  (I am unemployed, 56.  My spouse is retired, age 67)

Thanks.

[KrisD15]

To clarify, 

Whose IRA did you take a distribution from? 

Since you are not yet 59 1/2, will you be charged a penalty? 

Do you each have an IRA? 

If you took the distribution in 2021, the 60 day window has expired for doing a roll-over. 

Yes, you can make a deposit for tax year 2021 as long as it is done by April 18th 2022 and you tell the bank it is for 2021. 

[fanfare]

if you were unemployed in 2021, you had no earnings.

If your husband is retired, he had no earnings.

Without earnings, you can't make an IRA contribution.

[fanfare]

@dj21108 

if your husband had a retirement plan last year, the allowed deduction for a contribution is affected by his earnings (AGI).

OR

he can make a deductible contribution to your IRA as a spousal IRA contribution.

[dj21108]

My wife retired part way through the year so we do have earnings.

[dj21108]

Last year was very complicated with my spouse retired... She had both income through April, then Social Security and a pension start in May.   At the end of the year we took out a withdrawal from an IRA of my spouse's, but I overestimated (I tend to keep track of the finances.)

So, I can have my spouse make a deposit into my account since she had income from a job?

This is definitely not the best tax year for us.  I made a few mistakes.   It will make a big difference to be able to lower our AGI by about $5000.  

[JillS56]

As long as there are earnings that support the amount of contribution, you can make a contribution.   Just to be clear the income has to be earned income.  There was a prior comment about unemployment.   If your wife was receiving unemployment this is not considered earned income.   The amount of the deposit cannot be more than your taxable compensation for the year.

IRA Contributions

[dj21108]

We both have IRA's.  The distribution was taken from my spouse's IRA who is 67, so there isn't a penalty.

So  I think we are OK to make a deposit.    

It will be easier to deposit into my IRA (because the bank deposit is already set up.)   Is that OK (I had no 

earned income last year.)?

[DanaB27]

Yes, since your spouse had earned income you can make an IRA contribution to your IRA account, as long as the total of your combined contributions isn't more than the taxable compensation reported on your joint return.

Kay Bailey Hutchison Spousal IRA Limit (IRS Pub 590a)

"For 2021, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts.

1. $6,000 ($7,000 if you are age 50 or older).

2. The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts.

   1. Your spouse's IRA contribution for the year to a traditional IRA.

   2. Any contributions for the year to a Roth IRA on behalf of your spouse.

This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $12,000 ($13,000 if only one of you is age 50 or older, or $14,000 if both of you are age 50 or older).

Note.

Example:

Kristin, a full-time student with no taxable compensation, marries Carl during the year. Neither of them was age 50 by the end of 2021. For the year, Carl has taxable compensation of $30,000. He plans to contribute (and deduct) $6,000 to a traditional IRA. If he and Kristin file a joint return, each can contribute $6,000 to a traditional IRA. This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $6,000 = $24,000), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. In her case, $6,000 is her contribution limit, because $6,000 is less than $24,000 (her compensation for purposes of figuring her contribution limit)."

@dj21108

[fanfare]

@dj21108 

If you were both covered by a retirement plan as shown on your W-2, it may not be deductible.

It depends on your AGI.

Enter the proposed amount and TurboTax should give you  the good news or the bad news.