Received a W-2 in 2021 after retiring in 2020. How can I configure Turbotax to allow an IRS contribution in 2021?

[RetinSix]

I retired at the end of 2020. I received a W-2 with the retirement package income in 2021. I am trying to see if I am allowed an IRA contribution in 2021, but Turbotax tells me that I do not qualify. A financial planner told me I was allowed to make an IRA contribution for myself and my wife as long as neither one of us was covered by a retirement plan. How can I configure Turbotax to allow me to enter that deduction?

[ColeenD3]

How is it preventing you? What exactly are you being told? Are you trying to contribute more than your earnings?

For 2022, 2021, 2020, and 2019, the total contributions you make each year to all of your traditional IRAs  and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

For 2018, 2017, 2016, and 2015, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $5,500 ($6,500 if you're age 50 or older), or
• If less, your taxable compensation for the year

The IRA contribution limit does not apply to:

• Rollover contributions
• Qualified reservist repayments

Deducting your IRA contribution

Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

• IRA deduction limits

Roth IRA contribution limit

In addition to the general contribution limit that applies to both Roth and traditional IRAs, your Roth IRA contribution may be limited based on your filing status and income.

• 2022 - Amount of Roth IRA Contributions You Can Make for 2022
• 2021 - Amount of Roth IRA Contributions You Can Make for 2021

IRA contributions after age 70½

For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.

For 2019, if you’re 70 ½ or older, you can't make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

Spousal IRAs

If you file a joint return, you may be able to contribute to an IRA even if you didn’t have taxable compensation as long as your spouse did. Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the Kay Bailey Hutchison Spousal IRA Limit in Publication 590-A.

If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.

Can I contribute to an IRA if I participate in a retirement plan at work?

You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or business. However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.

[RetinSix]

I believe it is saying I can't contribute to an IRA because of my earnings level. But my earnings were the "package" I received to retire, not actual earnings since I did not work for my former company at all in 2021. 

[AnnetteB6 · Accepted solution]

Being allowed to make a contribution to a Traditional IRA or making a deductible contribution to a Traditional IRA are governed by the income reported on your return, your filing status, and whether you are covered by a retirement plan.  

If the income reported on your return, including the W-2 retirement package income, exceeds the limit that would allow a deductible Traditional IRA contribution then you will not be able to change it or make an exception regardless of whether you actually worked during 2021.

@RetinSix

[RetinSix]

Hold on. In checking the IRS website, www.irs.gov/retirement-plans/ira-deduction-limits, I see this: 

Traditional IRAs: no retirement plan at work:  Your deduction is allowed in full if you (and your spouse, if you are married) aren't covered by a retirement plan at work. 

Seems like Turbotax ought to go off of the Box 13 Retirement Plan entry to allow/disallow the traditional IRA deduction? 

[fanfare]

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[fanfare]

did you or your spouse have earned income in 2021  -1040 line 1 or Schedule C? that's a prerequisite.

If your AGI is too large, you can't deduct it.

[1940rich 1945sugarbear]

I have been retired for 4 years, also I have been disabled. I didn't earn any money.

I don't owe any taxes. did not have to pay in.

[DoninGA]

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@1940rich 1945sugarbear wrote:

I have been retired for 4 years, also I have been disabled. I didn't earn any money.

I don't owe any taxes. did not have to pay in.

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Do you receive a pension reported on a Form 1099-R?  Do you receive Social Security benefits reported on a SSA-1099?  Do you receive interest or dividends reported on a Form 1099-INT or Form 1099-DIV?