topic turbotax program not allowing a tax strategy that IRS has allowed by law in Deductions & credits

turbotax program not allowing a tax strategy that IRS has allowed by law

gootie — Wed, 12 Feb 2025 19:20:23 GMT

Married filing joint for 2 over 70 year old retired . one spouse has greater than $20,000 1099-NEC income while other spouse has no earned income. IRS has verified that with the one spouse income we qualify to contribute $7500 each to a simple IRA. My turbotax program is saying the non earned income spouse is not allowed to contribute to an IRA for tax year 2024. Is there a program update needed to address this discrepancy?

Re: turbotax program not allowing a tax strategy that IRS has allowed by law

AmyC — Fri, 14 Feb 2025 00:07:29 GMT

There are no known issues. Your ability to deduct contributions may be reduced or eliminated depending on your MAGI, filing status, and whether you have a workplace retirement plan. Let's look at the factors to make the fully allowed deductible contribution for each of you.

MAGI - Income of $20,000 on the NEC is the gross income. The IRA deductions look at the income available. Look at your 1040 line 11 to verify the income.
Filing Status - covered with MFJ
Workplace retirement plan - you must mark that your spouse is not actively participating in a retirement plan at work. There is a difference between receiving a pension versus working and contributing to your retirement plan.

Contribution allowed:

In 2024, the contribution limit for a spousal IRA is $7,000 per spouse, or $8,000 if you're 50 or older. This limit is the same as for regular IRAs.

Side note:

Making traditional IRA contributions would reduce your income and could cause a circle, with the math trying to make sense inside the program. ROTH contributions make the most sense for you since you don't have taxable income.

Re: turbotax program not allowing a tax strategy that IRS has allowed by law

AmeliesUncle — Fri, 14 Feb 2025 02:02:10 GMT

Is it $20,000 PROFIT from the business? Were there any employer retirement plans that would reduce the amount allowed to contribute to an IRA?

Are you entering it as a "Traditional" IRA? You mentioned a "simple" IRS, but a "SIMPLE" is a different kind of retirement plan.