Tax question.....regarding traditional IRA | TigerDroppings.com

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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

Tax question.....regarding traditional IRA


So I was doing my taxes on turbo tax and the turbo tax thing claims that I can't deduct my IRA contributions since my income is too high and/or I have an employer sponsored plan (401k)

2 things:

1. the 401K is from an old company and I no longer have it

2. I can't fathom that my income is really that high where I wouldn't be eligible for the tax benefits of a traditional IRA

I suppose if it really is then there is no point at all in me having one and I need to convert it to a ROTH right?







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ATL TGR
LSU Fan
Houston
Member since Apr 2008
2878 posts

re: Tax question.....regarding traditional IRA


Well what's your income level?





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Dead Mike
LSU Fan
Cell Block 4
Member since Mar 2010
1775 posts

re: Tax question.....regarding traditional IRA


Here are the deduction limits for 2012 if you're covered by an employer-sponsored plan:

LINK

You can recharacterize your contributions to a Roth IRA for the 2012 tax year, you should have until about mid-October to do so.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

re: Tax question.....regarding traditional IRA


Single and in the 120 to 140k range depending on overtime





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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

re: Tax question.....regarding traditional IRA


quote:

Here are the deduction limits for 2012 if you're covered by an employer-sponsored plan:

Thanks

But I'm not currently covered by an employee sponsored plan

I just had some 401K contributions from my old job (part of 2012)

Do you know if that matters or am I considered covered since I had some contributions from 2012?






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56394 posts

re: Tax question.....regarding traditional IRA


I think you are considered part of that plan for the 2012 year. If you've already made the traditional contribution you are probably going to have to recharaterize that to a Roth.





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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

re: Tax question.....regarding traditional IRA


Thanks

It looks like either way switching to a ROTH is going to be my best bet because I'll be contributing to current company 401K in July after I'm eligible (1 year mark)

Next question: the traditional ROTH I have is a rollover account that has my old 401K in it. If I switch to a ROTH is that going to have tax consequences on that rollover amount?






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56394 posts

re: Tax question.....regarding traditional IRA


quote:

the traditional ROTH


There is no such thing as a traditional Roth. It's either traditional or Roth. If it's old 401k money then it's a traditional IRA. Unless it was a Roth 401k that the money came from (highly doubt it). If you switch that to a Roth you will have tax consequences on the entire amount. Again, unless it was a Roth 401K.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

re: Tax question.....regarding traditional IRA


I meant traditional IRA

I need some coffee

The rollover IRA was a traditional IRA that had the old 401K money in it

That's the one I'm contemplating converting to a ROTH IRA (there really isn't that much in the account so I can live with the tax consequences of the 401K portion)






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56394 posts

re: Tax question.....regarding traditional IRA


quote:

That's the one I'm contemplating converting to a ROTH IRA (there really isn't that much in the account so I can live with the tax consequences of the 401K portion)


I think we have our answer then. I would double check with a tax pro on this though. I'm not 100% sure of the ramifications of partially funding a 401k and trying to do a traditional IRA






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Ace Midnight
LSU Fan
Ball, LA - Home, Sweet Home
Member since Dec 2006
30014 posts

re: Tax question.....regarding traditional IRA


quote:

That's the one I'm contemplating converting to a ROTH IRA (there really isn't that much in the account so I can live with the tax consequences of the 401K portion)


I don't think there's a penalty if you don't touch the money and follow all the appropriate rollover rules - however, going from a traditional to a Roth, you will be responsible for the raw income tax (I'm not sure about the payroll tax portion - consult your tax professional) because you're going from pre-tax to post-tax contributions.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120612 posts

re: Tax question.....regarding traditional IRA


quote:

consult your tax professional

The money talk forum is my tax pro






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Dead Mike
LSU Fan
Cell Block 4
Member since Mar 2010
1775 posts

re: Tax question.....regarding traditional IRA


You could always just keep the previously funded traditional IRA and recharacterize your contributions for 2012.





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