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Am I qualified for an IRA?
Old 03-02-2015, 01:05 PM   #1
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Am I qualified for an IRA?

I received a 1099Misc in the amount of $237,000 (box 7), according to the IRS, I am self-employed but I am not in trade or business as it is not a regular and continuous activity (see below).

1099-MISC, Independent Contractors, and Self-Employed

Question: I received a Form 1099-MISC instead of a Form W-2. I'm not self-employed and do not have a business. How do I report this income?

Answer:

If payment for services you provided is listed in box 7 of Form 1099-MISC (.pdf), Miscellaneous Income, the payer is treating you as a self-employed worker, also referred to as an independent contractor.
  • You do not necessarily have to have a business for payments for your services to be reported on Form 1099-MISC. You may simply perform services as a non-employee.
  • The payer has determined that an employer-employee relationship does not exist in your case.
If you were not an employee of the payer, where you report the income depends on whether your activity is a trade or business. You are in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.
  • If you are in a self-employed trade or business, you must include payments for your services on Schedule C (Form 1040) (.pdf), Profit or Loss From Business (Sole Proprietorship), or Schedule C-EZ (Form 1040) (.pdf), Net Profit From Business.
  • If you are self-employed, you will also need to complete Schedule SE (Form 1040) (.pdf), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment of $400 or more.
  • There is no withholding of tax from self-employment income. As a self-employed individual, you may need to make estimated tax payments during the year to cover your tax liabilities.
  • If you are not an employee of the payer, and you are not in a self-employed trade or business, you should report the income on line 21 of Form 1040 (.pdf), U.S. Individual Income Tax Return, and any expenses on Schedule A (Form 1040) (.pdf), Itemized Deductions.
If you believe you may be an employee of the payer, see Publication 1779 (.pdf), Independent Contractor or Employee, for an explanation of the difference between an independent contractor and an employee. For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, (Circular E), Employer's Tax Guide, Chapter 2 of Publication 15-A, Employer's

Am I qualified to contribute to any IRA? The only IRA I have is the rollover IRA. I read another publication regarding earned income but don't quite understand it.

mp
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Old 03-02-2015, 01:35 PM   #2
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I think for $237k it must have been fairly regular and continuous! Is this for 2014? If it was for 2015, I'd start an Individual 401k, but I think it's too late now for 2014. That's what I did when I was self employed for a couple of extended consulting j*bs.


An IRA just requires earned income, but $237k might take you beyond the limit where it's deductible if you have any other retirement plan between you and your spouse.


Publication 590-A (2014), Contributions to Individual Retirement Arrangements (IRAs)
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Old 03-02-2015, 02:17 PM   #3
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Quote:
Originally Posted by Animorph View Post
I think for $237k it must have been fairly regular and continuous! Is this for 2014? If it was for 2015, I'd start an Individual 401k, but I think it's too late now for 2014. That's what I did when I was self employed for a couple of extended consulting j*bs.


An IRA just requires earned income, but $237k might take you beyond the limit where it's deductible if you have any other retirement plan between you and your spouse.


Publication 590-A (2014), Contributions to Individual Retirement Arrangements (IRAs)

That $237,000 was for 2014. I have not qualified for any type of deductible IRA for the last 30 years, so the only IRA I have is the one I rolled over at the beginning of 2014 from my last employer. Since the $237,000 income in 2014 it is not a continuous consulting job, I am not qualified as trade and business per the IRS so I am not qualified for SEPIRA. Just wonder if I qualify for any other deductible IRA.
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Old 03-02-2015, 02:43 PM   #4
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IRA contribs are from earned income only, so read up on what the IRS considers earned income.
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Old 03-02-2015, 02:52 PM   #5
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Quote:
Originally Posted by Animorph View Post
I think for $237k it must have been fairly regular and continuous! Is this for 2014? If it was for 2015, I'd start an Individual 401k, but I think it's too late now for 2014. That's what I did when I was self employed for a couple of extended consulting j*bs.


An IRA just requires earned income, but $237k might take you beyond the limit where it's deductible if you have any other retirement plan between you and your spouse.


Publication 590-A (2014), Contributions to Individual Retirement Arrangements (IRAs)
Sounds like OP is beyond the limits, unless single, or married to spouse not covered by retirement plan.
2014 IRA Contribution and Deduction Limits - Effect of Modified AGI on Deductible Contributions if You are NOT Covered by a Retirement Plan at Work

Then you get to the question of earned income. Needs more research.
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