Turbotax shows excess contrib to wife's Roth IRA. We file jointly, have combined W2 income of 1,042. She contribd 1,041 to Roth. It's not excess contrib. Pls. fix system?

[mmecadillac]

Turbotax is incorrect telling us that we have excess contribution to my wife's Roth IRA. We file jointly, we have combined W2 income of $1,042. She contributed $1,041 to her Roth. Therefore there is no excess contribution. Please correct your system data.

[dmertz]

Is she the one with the higher compensation?  If so, only her compensation is permitted be used to support her IRA contribution and her maximum IRA contribution would be limited to her own compensation.  Only the spouse with the lower compensation is permitted to use the other spouse's compensation to support a spousal contribution.  TurboTax enforces this aspect of the tax code, so there is likely no problem with TurboTax and TurboTax is providing a correct indication of an excess Roth IRA contribution.

If she is the one with the higher compensation, you could make a contribution to your own IRA to use rest of the combined compensation to support IRA contributions.

[fanfare]

@dmertz   I thought the spouse had to have no income to have a contribution to their IRA based on the other's available compensation.

In other words, if you have the lower compensation, that's all you can contribute.

[dmertz]

No, fanfare, the spouse making the spousal contribution just needs to have less compensation:  § 219(c)(2)(B)

[mmecadillac · Accepted solution]

No, you are all incorrect.

I have consulted with my financial advisor on the issue shown above of Turbotax insiting that my Roth contribution has an excess amount. He is a certified Slott advisor. He has also consulted further with another IRA-specialist tax advisor who concurs that my entire Roth contribution is NOT an excess contribution for 2020 tax year. If TurboTax does not acknowledge and fix this programming error for 2020 tax year, I will not be using their application to file my taxes.

[dmertz]

Which of you has the lower compensation, you or your wife?

 If you are the one with the lower compensation, your wife's IRA contribution is limited to no more than her own compensation as dictated by section 219(c)(2)(B) of the tax code.  If this is the case, you and your advisor have overlooked this limitation.  The law only permits the spouse with the lower compensation to use the other spouse's compensation to support the contribution, no matter what anyone else says.

There is no substantiated problem with this calculation in TurboTax.

[fanfare]

I believe it is more correct to say -

 the spouse getting the spousal contribution just needs to have less compensation.

[dmertz]

Regardless of how you phrase it, it's the IRA participant's contribution no matter who makes the deposit on behalf of the participant.