Pension Plan checked on last paycheck, can't take IRA deduction

Forum|Forum|5 years ago
January 2, 2021
2 replies
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So, I was let go in Dec of 2019. I thought I was being smart by getting the severance payment (reported as salary) in early Jan of 2020 to reduce reportable income in 2019.

My current company doesn't have a pension plan, so I wanted to take the IRA deduction, however, I anticipate the W2 for the 2019 company's payment in 2020 will have Pension Plan checked. Because of that, I can't take an IRA deduction.

Is there a way around this? I may have outsmarted myself in asking for the payment in 2020. I know I can reach out to them, just looking for a different solution.

Best answer by dmertz

In your particular case, unchecking that box is correct. If you were audited, you can explain that the pension was from a previous job and a previous year.

You must enter the Form W-2 that you receive exactly as the form is provided. If it has Box 13 Retirement plan marked, you must have that box marked on TurboTax's W-2 form. When checking your tax return for accuracy, the IRS goes by the marking on the Form W-2 that the employer provides to you and to the IRS.

If box 13 Retirement plan is marked inappropriately on the Form W-2 that you receive from the employer, you must get the employer to provide a corrected W-2.

taxlady28

Level 10

Are you saying that you can't take an IRA deduction on your 2020 wages for your new job because you received a pension in 2020? As long as you also have earned income in 2020, I do not see why you would not be able to invest in an IRA.

Perhaps someone on here can clarify if you are truly ineligible for an IRA. Have you discussed this with your financial institution?

PaulinVAAuthor

Level 2

Thanks for the reply.

No, I'm anticipating that this company, which I never actually worked for in 2020 but received a last salary payment from in January, will provide a W2 with the "Pension Plan" box checked (since they provide a 401(k) to employees), making me ineligible to deduct an IRA contribution. Sorry for the confusion.