topic This did not answer my question. The question is "Why is... in Retirement tax questions

Why is my military pension being used on roth ira max contributions for Married Joint, with W-2 totals of $163K but TurboTax with military puts me over the $199K max?

kevrip — Sat, 01 Jun 2019 17:37:26 GMT

TurboTax Premier is stating I have exceeded the max income limits for contributing to my Roth IRAs. Our Married Joint W-2 income is $163K, but with my military pension, it is over the $189-199K max. I am being told by TurboTax that I have excess Roth IRA contributions and will be paying the 6% penalty for the $4200 (each) we contributed this year.

Your Roth IRA contribution might be limited based on your...

DanaB — Sat, 01 Jun 2019 17:37:28 GMT

Your Roth IRA contribution might be limited based on your filing status and income, which includes the pension and W-2s. Please see 2018 - Amount of Roth IRA Contributions You Can Make for 2018 for details on the limit.

Excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA. The tax can’t be more than 6% of the combined value of all your IRAs as of the end of the tax year.

To avoid the excess contributions tax:

withdraw the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
withdraw any income earned on the excess contribution.

This did not answer my question. The question is "Why is...

kevrip — Sat, 01 Jun 2019 17:37:30 GMT

This did not answer my question. The question is "Why is TurboTax adding my military pension to my modified AGI which then puts me above the limits mentioned?"

Per IRS p590A, military pensions are NOT compensation and therefore are not allowed for Roth IRA contributions.

My W-2 listed income is (married joint) $163K, which is s...

kevrip — Sat, 01 Jun 2019 17:37:31 GMT

My W-2 listed income is (married joint) $163K, which is still under the Roth IRA contribution limit. With the military pension amount listed on my 1099R, this puts me over the contribution limits. I don't think that is correct, as military pensions are excluded from "compensation" as defined in IRS p590a.

If you follow the link provided above it shows that your...

DanaB — Sat, 01 Jun 2019 17:37:32 GMT

If you follow the link provided above it shows that your Roth IRA contribution might be limited based on the MAGI which includes the military pension. To calculate your modified adjusted gross income, take your AGI and add back certain deductions. If you are over a certain MAGI then you cannot contribute to a Roth IRA.
You are mixing it up with the annual limit, these are two different criteria:
For 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:

$5,500 ($6,500 if you’re age 50 or older), or
your taxable compensation for the year, if your compensation was less than this dollar limit.

That just seems odd that you can't use the military pensi...

kevrip — Sat, 01 Jun 2019 17:37:33 GMT

That just seems odd that you can't use the military pension to contribute to the Roth, but it IS counted toward your MAGI, to limit your contribution amounts. Thank you for the explanation!

You are welcome! Glad to help!

DanaB — Sat, 01 Jun 2019 17:37:34 GMT

You are welcome! Glad to help!

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W-2 totals of $163K but TurboTax with military puts me over the $199K max?

2020PA — Sat, 11 Jul 2020 18:30:23 GMT

The response is incorrect. Military retirement is not included in the AGI for purposes of a ROTH IRA. If turbo tax shows it this way without a way to correct it when filing then I may have to use a different service.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

Earnings and profits from property, such as rental income, interest income, and dividend income.
Pension or annuity income.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W-2 totals of $163K but TurboTax with military puts me over the $199K max?

DoninGA — Sat, 11 Jul 2020 18:43:35 GMT

@2020PA wrote:

The response is incorrect. Military retirement is not included in the AGI for purposes of a ROTH IRA. If turbo tax shows it this way without a way to correct it when filing then I may have to use a different service.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

Earnings and profits from property, such as rental income, interest income, and dividend income.

Pension or annuity income.

Where in IRS Publication 590-A Contributions to Individual Retirement Arrangements (IRAs) (2019), do you see that military pension income is not to included in the MAGI Worksheet 2-1 Modified Adjusted Gross Income for Roth IRA Purposes, page 40 - https://www.irs.gov/pub/irs-pdf/p590a.pdf#page=40

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W-2 totals of $163K but TurboTax with military puts me over the $199K max?

DoninGA — Sat, 11 Jul 2020 18:47:20 GMT

TurboTax does not use pension or annuity income when calculating MAGI for an IRA.

Re: This did not answer my question. The question is "Why is...

Mateo87 — Tue, 14 Jul 2020 15:27:06 GMT

Your AGI includes all compensation (wages on W-2, salaries, bonuses, self-employment income, etc.), Interest, Dividends, Social Security Benefits, Pensions/Annuities (military retirement), etc. How much you can contribute to a Roth IRA is based on taxable compensation (wages, salaries, bonuses, self-employment income) and your modified AGI (which includes military retirement pension). Your military retirement doesn't count towards compensation but it is included in the modified AGI.

If your modified AGI is above a certain amount, your contribution limit may be reduced. (See Publication 590A, Table 2-1). If your income is between 193,000 but less than $203,000 your contribution is reduced. If it is greater than $203,000 for married filing jointly your contributions are not deductible.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W-2 totals of $163K but TurboTax with military puts me over the $199K max?

Jclabat — Sun, 05 Feb 2023 02:47:14 GMT

Isn't it in line 5b of the 1040. That Roth MAGI calculation worksheet has you subtracting 4b and 5b from your AGI on 11. Turbo Tax has my traditional pension on 5b so I presume a military pension is also on that line.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

RobertB4444 — Sun, 05 Feb 2023 16:43:47 GMT

Your military pension will show up on line 5b.

@Jclabat

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

Jclabat — Sun, 05 Feb 2023 17:52:24 GMT

That is what I expected, but back to original question then, it should not have shown that he had excess Roth IRA contributions, because the military pension amount should have been subtracted from AGI to calculate MAGI for Roth IRA contributions. This may be fixed now, but it was clearly an issue in the original post.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

RobertB4444 — Sun, 05 Feb 2023 19:40:01 GMT

It may well have been an issue in the TurboTax 2020 product that had to be fixed at that time. But it has not been an issue in the TurboTax 2022 product.

@Jclabat

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

Davidrm1 — Fri, 24 Mar 2023 19:40:16 GMT

I am having the same exact problem as the original post trying to file my 2022 taxes.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

DanaB27 — Fri, 24 Mar 2023 20:20:36 GMT

Please review Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes and note that line 2 on the worksheet only subtracts conversions to Roth IRA from lines 4b and 5b of Form 1040. Therefore, the military retirement distribution will be included in the MAGI to determine if you can make Roth IRA contributions.

Please keep in mind you can only contribute to a Roth IRA if you have taxable compensation (military pension not included) and your modified AGI (military pension included) is less than:

$214,000 for married filing jointly or qualifying widow(er);
$144,000 for single, head of household, or married filing separately and you didn’t live with your spouse at any time during the year; and
$10,000 for married filing separately and you lived with your spouse at any time during the year.

Please see What happens if I made an excess Roth IRA contribution for additional information.

@Davidrm1

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

Davidrm1 — Fri, 24 Mar 2023 20:28:37 GMT

Dana,

Thank you for the response. I know you provided it before, but I wasn't understanding why. I am assuming that because it is taxable it is included in the AGI? We hadn't made the contributions yet as we were unsure if we could go the ROTH route this year. I guess we will have to go the Traditional route and then convert them.

Thanks again.

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

Jclabat — Sat, 25 Mar 2023 14:45:33 GMT

See previous posts - a military pension should be on line 5b which is a subtraction from AGI to produce MAGI. Are you entering your pension in the correct place so it gets captured on 5b (as a 1099-R)?

Re: Why is my military pension being used on roth ira max contributions for Married Joint, with W...

DanaB27 — Sat, 25 Mar 2023 15:01:44 GMT

Yes, the military pension will be listed on line 5b.

No, line 5b won't be always subtracted from the AGI to produce the MAGI for Roth IRA purposes. Please review Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes and note that line 2 on the worksheet only subtracts conversions to Roth IRA on lines 4b and 5b of Form 1040. Therefore, the military retirement distribution will be included in the MAGI to determine if you can make Roth IRA contributions.

@Jclabat