Turbotax keeps incorrectly indicating that I am covered by a workplace retirement plan

[JaneD456]

At one point when filling out Turbotax, it asked me whether both my husband and I are covered by workplace plans. When I hit "no" (he is, I am not), my Federal tax went from owing money to a nice surplus. Unfortunately, the next time I signed in, Turbotax seems to have reverted back to the assumption that we are both covered, thus making my IRA contribution no longer deductible. 

I'd like to change the critical question (are you both covered by a workplace retirement plan)  back to the correct answer of "no", but I cannot find that prompt anywhere! I have gone through the ENTIRE return numerous times, and the prompt seems to have vanished. 

Unlike other people in this forum who had the same issue, mine is NOT the case of a mistaken W2 entry, since I only have 1099 income, so I do not have a W2.  

Please help!

[Anonymous]

Since you only have 1099 income, this is likely something in the Business section in your income and expenses.  Maybe a mark that you intended to contribute to a SEP or 401k or something like that?  That would be where I would look next.  

And just as an aside - if you don't already have a SEP, they are as simple to set up as most regular IRAs and if you had a good deal of profit in your business you can put in more money (and it is a better tax deduction even if you don't put in more) with this type of plan.  My favorite thing about them, though, is that if you file an extension for your return (even if you file the return the very next day) you have until 10/15 to fund it.  So you can lower your tax bill by promising to put $X in your SEP by 10/15 - sometimes it works out so you get a refund and can use that refund in part to fund it.  If for any reason you don't make the contribution in time, you amend the return and pay more tax so you have to be careful but it's a great deal.  25% of your net profit (adjusted down for the contribution itself so it's not a pure 25%) and it saves SE and income tax and max contribution is $58,000 (if profit supports a contribution that high).

Anyway, I would revisit the retirement plans section under the Business part(s) of the program.

[MaryM428]

On TurboTax follow these steps to change the question about having a plan at work:

• Federal
• Deductions and Credits
• Retirement and Investments
• Traditional and Roth IRA Contributions
• Put a check under your name for traditional IRA
• Go through the screens until you come to Retirement Plan at Work
• Select No

But you would still not be eligible for a traditional IRA is you only have unearned 1099 income, such as 1099-DIV. or 1099-R.

To contribute to a traditional IRA, you must have earned income.  If your 1099 income is earned income, then you will qualify for the IRA.

[JaneD456]

I just tried this exact sequence several times,  but I never get the screen that asks me if I have a Retirement Plan at Work. Instead, it just ends by telling me that I cannot deduct my IRA because I exceed the MAGI (which would be true if we were both covered by a retirement plan, but we fall under the limit for married filing jointly where one party does NOT have a retirement plan). 

The sequence you suggested is the one that originally brought me to the prompt, which I answered in the negative. At that time, it permitted me to deduct my IRA contribution (my 1099 is earned income). When I came back to Turbotax the next day just to print out my record, however, it had somehow reverted to being  excluded from deduction, which made a very sizeable difference for my return. 

[SamS1]

Have you checked your W-2 entries?  There in box 13 on the W-2 that indicates if you are covered by a qualified plan.  Remember, you just have to covered by a plan to get kicked down to the lower MAGI even if you didn't contribute to it.

The 1099/W2 Series are informational reporting forms submitted to the IRS by third parties. The IRS then matches the form information to your tax return to insure all income is reported and taxed.

[JaneD456]

@SamS1 I don't have a W-2; only an earned income 1099, which doesn't have the equivalent of a box 13, so I'm totally confused as to why it would assume I'm covered by a workplace retirement plan. 

[Irene2805]

Please check these screens in the IRA Contribution interview:

• Is This a Repayment of a Retirement Distribution?  Make sure the No box is checked
• Retirement Plan Coverage?   Make sure the No box is checked

If your IRA deduction is still limited because of an employer retirement plan, delete the IRA Contribution Worksheet and reenter your IRA contributions.

I know your income is reported on a 1099, but it doesn't hurt to just check the Forms List in Delete a Form (if you haven't already) that there isn't a W-2 lurking in your forms list.  If there is, delete it.

To delete an individual form, please follow these steps:

TurboTax Online

1. While in your return, click on Tax Tools > Tools (in the black bar at the side of your screen).  
2. In the Tools Center, under Other helpful links click on Delete a form.
3. Click Delete next to the form you want to delete and follow the onscreen instructions. 
4. Once you have finished deleting the desired form(s) click the Continue with My Return box (in the lower right of your screen).

TurboTax CD/Download

1. Go into Forms Mode by clicking on the Forms icon in the top right of the blue bar. 
2. In the Forms in My Return list on the left, click on the form you wish to open and delete.
3. Click on the Delete Form box at the bottom of the screen.
4. To return to the interview, click on the Step-By-Step icon in the top right of the blue bar.  

[MX-CPA]

So, are you saying that if I am covered by my employer's plan, I am not eligible to deduct my IRA contribution?  I am having the same problem as the original post except that I do have W-2's and one of them has that box checked even tho I did not participate in the employer's plan.

[SusanY1]

Yes, this is correct.  If the box is checked indicating that you are covered, even if you do not participate, then you may not be eligible to make a deductible contribution to an individual retirement account. 

This is ultimately based on your total income in combination with the status of your eligibility to participate in an employer-sponsored plan.  

The income limits for taxpayers who are covered by an employer's plan are listed HERE.

@MX-CPA