401K and IRA Deduction

Forum|Forum|5 years ago
February 9, 2021
1 reply
0 views

Hello,

My understanding of the IRA deduction is, as long as you did not make any contributions to a 401k, you are NOT considered covered by an employer retirement plan.

The Situation

I filed 2020 taxes already with the $6,000 max IRA contribution and was surprised earlier today with a W2 from my former employer. My last day of employment with them was January 2nd 2020. In January I received a final paycheck for my vacation days. I was contributing to a 401k plan with my former employer but opted out and DID NOT contribute to a 401k plan with my new employer. I also do not have box 13 checked on my current employers 2020 W2 which is correct since I am not covered by a retirement plan with that employer.

The Question

Do I count as a covered by a retirement plan in 2020 because a percentage of my vacation payout in January did go into that 401k ?

TurboTax Deluxe Online

Best answer by DanaB27

Yes, you are considered to be covered by a retirement plan all year even if only were covered for one day. Please see IRS Are You Covered by an Employer's Retirement Plan? for more details.

DanaB27Answer

Level 15

Yes, you are considered to be covered by a retirement plan all year even if only were covered for one day. Please see IRS Are You Covered by an Employer's Retirement Plan? for more details.

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TomM42Author

Level 2

Thank you for the quick response.

Looks like I will have to amend for the W2 and also remove the IRA deduction (haven't actually made it though) since my modified AGI exceeds the limit for a covered plan.

1 freaking day caused all this mess.