401K and IRA Deduction

[TomM42]

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 ? 

[DanaB27 · Accepted solution]

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.

[TomM42]

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.