Turbotax is at odds with IRS regulations. IRS says wife can use husbands income as basis for IRA contribution. Turbotax rejects this. How can I get Turbotax to comply?

[dmertz]

Entered correctly, TurboTax does handle spousal IRA contributions correctly and has done so for many years.

[SpartyTaxPayer]

 You have stated:

"Only the spouse with the lower compensation is eligible to use the other spouse's compensation to support their IRA contribution"

I cannot find anywhere on the internet what the maximum "lower" compensation is!

For example, what if my wife is employed with an on-call job and made $200 (W2 wages) in 2022? Does she still qualify for the spousal IRA (assuming I qualify with all the other stipulations)? Or does she need to be NOT BE EMPLOYED?

[dmertz]

Lower than the compensation of the other spouse.   § 219(c)(2)(B):

(B) the amount of compensation (if any) includible in such individual’s gross income for the taxable year is less than the compensation includible in the gross income of such individual’s spouse for the taxable year.

If your wife has $200 reported in box 1 of a W-2 and no other compensation, she can contribute at least $200 to an IRA.  If you have less than $200 of compensation, you, not your wife, is the one with the lower compensation and would be able to contribute from your wife's $200 whatever amount of that $200 your wife does not use to support an IRA contribution.  If you have more than $200 of compensation, your wife could use your compensation to support an IRA contribution of more than $200 (provided you do not use all of your compensation to support your own IRA contribution).

[fanfare]

in other words only one spouse, the spouse with the lower income, can have a contribution made for them.

The other spouse needs to have the earnings of at least that amount after adjusting for their own contribution, if any.

[Xavier91]

You are referring to the Kay Bailey Hutchison Spousal IRA Limit

https://www.irs.gov/publications/p590a#en_US_2021_publink1000230412 

And you are correct, TurboTax does a horrific job with this.  There was a recent year we didn't contribute because TT made us think we couldn't.  I can't believe with all the upset customers this hasn't been more clearly resolved.  Read about it with this IRS link and it should make sense.  As to how TT will integrate it for 2023, I can only hope!

[Xavier91]

I 100% agree that this is a problem.  Love when TT makes you think it's user error.  The Kay Bailey Hutchison Spousal IRA Limit is very clear on this matter.

[dmertz]

TurboTax handles spousal IRA contributions just fine.  Such contributions are entered the same way as any other IRA contribution.  Any problems with them in TurboTax are due to user entry error or the user misunderstanding the statutory limitations.

[SpartyTaxPayer]

But in your Tom and Darcy example, I thought the spousal IRA rule was that the spouse who makes less has to be UNEMPLOYED and not make any wages in order to qualify to open a spousal IRA. Where in the rules does it say that Tom, who does work, can open a spousal IRA?

[SpartyTaxPayer]

Sorry, you already answered this! With your answer to my original question! I just read it. Thanks.

So many financial websites say that the spouse opening the spousal IRA has to be a stay-at-home spouse or not employed. According to your response, they just need to make less money than their spouse!

Thanks!

[fanfare]

if that were so it would say the "spouse who had no income"

the spouse opens their IRA. somebody deposits money.

It is Tom's compensation that make it allowed.