Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Independent Contractor Roth IRA?
Old 01-23-2016, 03:53 PM   #1
Recycles dryer sheets
Mo Money's Avatar
 
Join Date: Mar 2014
Location: .
Posts: 269
Independent Contractor Roth IRA?

I retired at the end of February 2015. Right before I retired, I made a backdoor 2015 Roth contribution -- the maximum allowed for 2015.

After ER, I did some 2015 independent contractor work for my former law fi*m. That IC w*rk will continue for a portion of 2016. Please note that some of my 2015 time was paid to me with a check issued January 2, 2016.

I have a Roth IRA at Schwab, as well as a traditional IRA. In 2015 I rolled all w*rk retirement accounts into those IRAs.

Question 1: For 2016, may I make a Roth contribution equal to the IC income I earn in 2016, up to the 2016 max of $6500? (I am over 50.)

Question 2: Can I contribute directly to the Roth, or do I have to do the backdoor Roth routine once again?

Question 3: Since I was paid by check dated January 2, 2016 for two months of 2015 IC w*rk, can I put that money in my Roth as part of my 2016 Roth contribution?

Thanks in advance for any wisdom on these issues.
__________________

__________________
“We always may be what we might have been.” -- Adelaide Anne Procter
Mo Money is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-23-2016, 04:02 PM   #2
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,067
When will you get the 1099 or W2? If it is a 2016 1099, or you claim the income for 2016, you can contribute to a 2016 Roth.

You can also do any backdoor Roth conversions. Those contributions will be unaffected.

Assuming you are on a cash accounting basis, not accrual.
__________________

__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is online now   Reply With Quote
Independent Contractor Roth IRA?
Old 01-23-2016, 05:52 PM   #3
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 2,930
Independent Contractor Roth IRA?

I wouldn't do a backdoor if you have an existing IRA because of tax complication. I would do a Roth IRA if you are under the limit.


Sent from my iPad using Early Retirement Forum
__________________
When I post IIRC, that means going by memory. Google is your friend for facts. Stop being a lazy bum, I can't do all the googling for you. I'm lazy too. LOL
Fedup is offline   Reply With Quote
Old 01-24-2016, 12:22 AM   #4
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,749
As a non employee, you are an employer of yourself.

So you can open a Vanguard solo 401K Roth (or IRA or both) Account now for the tax year 2016. You missed the 2015 tax year as it has to be opened within the tax year initially.

What you then get is the ability to contribute $23,000 (including catch up amount) to the ROTH 401K and 25% of after expense money you were paid which can go as "employer" contribution into the IRA 401K account and is deductible.

The max limit is ~$53K in total per year.

Plus you still get to do your own Roth contribution of $6,500 /yr for yourself and $6,500 /y for your spouse if you have one.

https://investor.vanguard.com/what-w...ndividual-401k
__________________
Sunset is offline   Reply With Quote
Old 01-24-2016, 07:06 AM   #5
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
It's not clear to me whether or not you are a self-employed for tax purposes in this endeavor. If I'm a self-employed independent contractor, I'd be looking more at a SEP IRA or a solo 401K, not a vanilla Roth IRA, since those plans also reduce self-employment tax which can be a massive hit (probably about another 14% hit above and beyond income tax in a bracket low enough for a Roth to make sense).

Obviously, if you had enough self-employment income to max out a solo 401K *and* a Roth IRA, so much the better.

If this isn't self-employment income subject to self-employment tax, then the usual rules apply, and in a low tax bracket (say 15% or less), yeah, a Roth is probably the way to go, IMO.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 01-30-2016, 01:57 PM   #6
Recycles dryer sheets
Mo Money's Avatar
 
Join Date: Mar 2014
Location: .
Posts: 269
Thank you for the input -- I will look into opening a solo Roth 401K, and into contributing the statutory max to the Roth IRA.

A question for you tax gurus:

If I get a substantial 2016 payment to cover phantom income for 2015 (I worked two months as a law partner in 2015), is that phantom income payment eligible to sock away in a solo Roth 401K or Roth IRA? I am guessing that such phantom income will be documented with a 1099 now that I am an independent contractor. I suppose I "worked" for that income, since the IRS says I owe it....
__________________
“We always may be what we might have been.” -- Adelaide Anne Procter
Mo Money is offline   Reply With Quote
Old 01-30-2016, 10:27 PM   #7
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,067
Quote:
Originally Posted by Mo Money View Post
If I get a substantial 2016 payment to cover phantom income for 2015 (I worked two months as a law partner in 2015), is that phantom income payment eligible to sock away in a solo Roth 401K or Roth IRA? I am guessing that such phantom income will be documented with a 1099 now that I am an independent contractor. I suppose I "worked" for that income, since the IRS says I owe it....
Even if you do not get a 1099, you can claim the income. You can make it up if you want, the IRS doesn't mind if you declare extra income.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is online now   Reply With Quote
Old 01-30-2016, 11:41 PM   #8
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,749
Quote:
Originally Posted by Mo Money View Post
Thank you for the input -- I will look into opening a solo Roth 401K, and into contributing the statutory max to the Roth IRA. .
As self employed you will want also to have a solo 401K IRA for the 25% of net income considered to be employer portion as it is not eligible for contribution to the solo 401K ROTH.

Unless of course you like paying extra taxes
__________________

__________________
Sunset is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Independent Contractor and Taxes LinCella Life after FIRE 17 08-15-2015 05:51 PM
Retirement/Tax Benefits of Independent Contractor inquisitive FIRE and Money 20 10-08-2014 07:32 AM
what is being an independent contractor like ER_Hopeful Young Dreamers 17 02-27-2011 05:01 PM
converting IRA to Roth IRA based on new Roth Rules vs. 72t mbmmccoy FIRE and Money 27 09-28-2009 07:27 AM
Questions about limits surrounding ROTH IRA, SEP IRA and ROTH 401k RockSplat FIRE and Money 14 06-08-2009 01:30 PM

 

 
All times are GMT -6. The time now is 11:57 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.